But Cut the Sales Tax on Food? Perish the Thought!
My neighbor Betty Sheldon made an impassioned plea to legislators at Saturday’s crackerbarrel to protect arts funding in South Dakota and reject House Bill 1206, which would cut the May–September tourism tax by a third that currently helps the South Dakota Arts Council win federal matching funds and promote a plethora of cultural programs:
Representative Drew Dennert was hoping someone would ask this question. Apparently our rookie rep has been brewing up a solution: a two-tiered tourism tax that would bump the tourism tax from 1.5% to 2% for out-of-staters and cut it to zero for South Dakotans. (Don’t let Mark Mickelson tell you that out-of-state money is bad for South Dakota!) Evidently Dennert and his colleague Rep. Tom Pischke, prime sponsor of HB 1206, share a deep, abiding concern for “low-income families” and want to lower their in-state vacation costs.
Rep. Dennert’s Pierre carpool pal Rep. Dan Kaiser (also a sponsor of HB 1206) agreed with Sheldon that the arts are vital to South Dakota tourism, specifically citing Mount Rushmore. Rep. Kaiser said that North Dakota has implemented a two-tiered tourism tax, lowering the rate for Montanans to attract more of their neighbors to spend money in the state (wait—what? why don’t North Dakotans give South Dakotans a break? Don’t they want us to come to their state?). Having noted the significant amount of pushback he’s received for the harm the tax cut could do to arts funding, Kaiser said “it’s kinda neat… to be working on this idea and then to have a lot of people tell ya, ‘Your idea sucks!'” Dang—where was that attitude last year when Kaiser heard lots of people say the idea of repealing IM 22 sucked?
While I appreciate our Republican representatives’ desire to ease the summertime tax burden on low-income South Dakotans who can afford to go to Reptile Gardens or the Prairie Village Steam Threshing Jamboree, neither Dennert, Kaiser, nor any of the other eight conservative Republicans backing HB 1206 have signed on to either of the measures Democrats have proposed to cut the year-round tax burden all low-income South Dakotans bear on their grocery bills. House Bill 1238 is the perennial Democratic proposal to cut the sales tax on food and offset the lost revenue by raising sales tax on everything else by 0.35 percentage points. Senate Bill 159 would tie reductions in the sales tax on food to new sales tax revenue from remote online sellers.
Sister Myra of the Presentation Sisters raised SB 159 and the benefits a food tax repeal would have for the poor in an earlier question. Democratic Senator Jason Frerichs, a co-sponsor of SB 159, said providing food-tax relief is a great idea. The Republicans at the front disagreed:
Senator Brock Greenfield expressed his love for South Dakota’s regressive tax system by saying everyone needs to pay a little so that no one pays a lot. He said we can’t lower the food tax without taking away services that those poor folks rely on. Besides, when South Dakota offered a sales-tax rebate program a few years ago, hardly anyone applied for it, so Senator Greenfield concludes with impenetrable logic that there’s no need for food-tax relief.
Senator Al Novstrup backed Brock, saying unmet needs should be a higher priority that giving tax cuts (where was that thinking in Congress in December?!)
Rep. Dennert said he doubts SB 159 will make it past the Senate. With that cover, Rep. Dennert (to his credit, I’ll admit) said he would be “open to supporting” SB 159 “should it make it to the House.”
My neighbor Joe Berns challenged the “false choice” Senator Greenfield offered of sales tax relief or continued public services. Senator Greenfield immediately cried “Income tax!” and maintained his support for South Dakota’s regressive tax system:
Republicans are saying some good things on HB 1206, the tourism tax cut. Rep. Dennert is acknowledging that taxing the poor is bad. Dennert’s compromise and Kaiser’s support for it show that legislators can respond to public pressure.
But in the context of the preceding questions on South Dakota’s food tax and Democratic proposals to reduce it, HB 1206 shows how South Dakota Republicans don’t get their own inconsistency. They dig tax relief for the poor on tourism (and think about it: if Republicans saw low-income folks out enjoying a vacation, they’d say, “Those poor people should be working!”), but they think tax relief for the poor on the most basic necessities is just a ploy to pass an income tax.
As an out of stater, the Black Hills are expensive enough. I’ve heard Minnesotans comment on how surprised they are with the prices of everything in the Black Hills. I mean come on, even a hefty fee to park at Mt Rushmore. It’s getting pretty ridiculous. Some families are choosing only one expensive place to go visit (Reptile Gardens or Bear Country not both) when they’re out there since everything is way overpriced and it adds up if you have several kids.
Save the expensive vacations on exotic places and don’t soak us on small Black Hills trips, SD!
About Sen.Brock’s comment “we can’t lower the food tax without taking away services that those poor folks rely on.”
He and the rest of us need to know what SB159 does: When the food tax (& non-food) was raised in 2016 by 1⁄2% for teacher pay, a little-known part of that law (sec.19) obligates the state to use proceeds from the new tax revenue from online sales to reduce the sales tax.
SB159 simply re-directs that required cut in sales tax from tenths of percents off the general rate to whole percents off the most regressive part of our sales tax, the tax on groceries.
In short, if conditions are met, SB159 directs the next sales tax cut to groceries.
Is reptile gardens a new name for the lege?
Mike—ha!
Cathy, I agree: we accepted the increase in the regressive tax in 2016 for a greater good in part on the condition that we would use future new revenue to ease back on that regressive burden. Senator Nesiba’s SB 159 focuses that relief on one of the most regressive elements of our sales tax.
Jenny offers a good reminder that increasing the tax on tourists could be counterproductive. I’m surprised that such a two-tiered tax treating South Dakotans and out-of-staters differently is constitutional. What’s the constitutional provision or case law that allows us to tax one guy $0 and the next guy $1 on his family ticket to Reptile Gardens just because the first guy is from Flandreau and the second guy is from Pipestone? Do we have any other resident/non-resident taxes in South Dakota?
With a 1/2 of 1 percent tax, the tax for every $200 spent is just $1. What is the big deal with the extra 1/2 of 1 percent tax? If I had $1000 to spend on a vacation and this tax existed, it would mean I would have to reduce my spending by $5. I’d say that is meaningless. I could cover that $5 by reducing my travel speed by 1 MPH and saving a bit of gas.
I just do not understand what is going on in Pierre. The legislators spend so much time on meaningless stuff like this.
Maybe it is time to raise legislator pay to see if we get different people to go to Pierre to work on issues to make SD better.
You’re on the right track, Scott. Why give tax relief for luxuries instead of necessities? HB 1206 is a poorly targeted tax cut, with no substantial stimulatory or progressivizing effect.
Oops—was. House Taxation killed it this morning 9–6!