South Dakota Republicans are salivating at the prospect of judicial activists overturning stare decisis and allowing South Dakota to conscript out-of-state businesses in South Dakota’s effort to take more tax dollars out of its citizens’ pockets. Meanwhile, South Dakota Democrats are trying to hold the line and remind those faux-conservatives that state law has already committed us to use any new revenue from online sales tax to ease the burden of our extremely regressive tax structure.
Senator Reynold Nesiba (D-15/Sioux Falls) puts his economics degree to use in writing Senate Bill 159, which modifies one little sales tax statute. Recall that in 2016, the big sales tax bill we passed to fund the Blue Ribbon teacher pay increases contained Section 19—now SDCL 10-64-9—which obligates the state to use any proceeds from new sales tax revenue collected by remote sellers to reduce other sales taxes. If the Supreme Court votes our way on South Dakota v. Wayfair, current law would lower the sales tax rate on certain items by 0.1% for each $20 million in new revenue from remote sellers. SB 159 amends that reduction to 1% for each $10 million in new revenue and applies the reduction strictly to sales tax on food.*
Current law doesn’t let the state sales tax drop below 4%. SB 159 removes that floor.** If the Governor’s estimate of $50 million in recoupable remote sales tax is not exaggerated, then online sales tax revenue post-positive-Wayfair and post-SB 159 would take the sales tax on food to 0%.** In other words, we’d be raising taxes on people with the disposable income to buy cool stuff online and lowering taxes on people who eat. For lower-income South Dakotans who spend a higher proportion of their income feeding their kids, SB 159 would be a good deal.
But South Dakota Republicans are committed to punishing the poor, and not one Republican legislator has signed on to SB 159. Expect Republicans to kill SB 159 in committee, just like they kill food-tax relief in every Session. They will also reel at Senator Nesiba’s reminder that we can’t bank on a victory in the Supreme Court to patch our budget shortfall; that revenue, if we get it, is already spoken for to cover the sales tax we raised in 2016 to pay our teachers.
*Legal Lingo: At least that’s the intent expressed in line 8, which says “reduce the rate of
certain taxes taxation on food.” But then lines 8–11 cut the specific taxes targeted for the online tax offset and replace them with “chapters 10-45 and 10-46.” The first change targets the tax on food, but the second change seems to apply it to everything our sales and use taxes cover.
**Math Note: Or would the food tax be negative? The current state sales tax rate is 4.5%. Take in $50M from Amazon et al., drop the rate by five percentage points… 4.5 – 5.0 = –0.5! Every time I buy a $20 sack of groceries, the state will pay me a dime! Whoo-hoo!
It seems impossible for our Legislators to consider cutting taxes on food… or raising taxes on Booze.
All that free food legislators get must cause them to forget how much food costs for working people.
I bet living on free hot dogs and bean dip every day for half the year does make the legislatures forget about the cost of tax on their treats. But the lobbyists pay tax when they buy the food, so it is getting paid. It doesn’t really matter who is paying the tax as long as whoever buys the food pays it.
Nesiba and his colleagues have also filed HB 1238, this year’s incarnation of the perennial Democratic effort to repeal the food tax and compensate by raising the sales tax on other items by 0.35 percentage points. If we passed HB 1238, the sales tax rate on food would go to zero. Then if we passed SB 159, the sales tax rate on food would go negative immediately upon a favorable SD v Wayfair ruling! Whoo-hoo! Get set to get paid to eat (kind of our own local farm subsidy to make up for Congress’s almost certain failure to pass a Farm Bill this year)!