Two Proposed Booze Taxes Could Give Local Govts $75 Million

Thursday morning’s House Taxation hearing fields three tax bills of interest to eaters and drinkers.

The Democratic caucus, rebuffed last week on its sensible call to focus the Amazon tax on lowering the sales tax on food, will present House Bill 1238, its traditional measure to zero the food tax and make up the difference with an extra 0.35 percentage points of sales tax on everything else.

After killing that bill, House Taxation will turn to two booze taxes. First, House Bill 1294 would impose a new tax on wholesalers and manufacturers of alcoholic beverages, including farm wineries and artisan distillers:

1. Malt beverages: 53¢/gallon.
2. Wines, ciders, and diluted beverages: $1.27/gallon.
3. Everything else alcoholic: $4.27/gallon.

Half of the revenues raised by this new hooch tax would go to municipalities in proportion to population. The other half goes to counties, with a quarter divvied up evenly among all counties and the other three quarters distributed proportionately to population.

Let’s run some numbers on HB 1294:

1. In 2015, South Dakotans consumed 22.8 million gallons of beer, 1.5 million gallons of wine, and 1.7 million gallons of spirits. (That’s the tenth-highest per-capita alcohol consumption in the U.S. Cheers.)
2. Applying HB 1294’s tax rates to the above quantities would produce $21.3 million in new tax revenue.
3. HB 1294 would split that sum into $10.7 million for cities and $10.7 for counties.
4. Every county would get $40,400 from the smaller uniform share of HB 1294’s county allocation.
5. Minnehaha County, with 21.6% of the state’s population, would get 16.6%($1.77 million) of the HB 1294 hooch tax.
6. Jones County, which has 0.11% of the state’s population, would get 0.46% ($48,989) of the HB 1294 hooch tax.
7. South Dakota’s ten most populous counties, making up 63.3% of the state’s population, would get 51.3% of the HB 1294 hooch tax.

House Bill 1308 seeks a new quarter-a-drink tax. It imposes per-gallon rates like HB 1294 but categorizes beverages a bit differently, taxing ciders like malt beverages instead of like wine:

1. Malt beverages and ciders: $2.66/gallon.
2. Wines: $6.40/gallon.
3. Distilled spirits: $21.33/gallon.

Apply those tax rates to the above 2015 consumption figures, and South Dakota gets $107 million in new revenue. HB 1308 keeps half of that hooch tax for the state to use on “any purpose related to alcohol harm, including public safety, alcohol treatment programming, underage alcohol and drug prevention programming, healthcare, mental healthcare, child and family services, or adjudication of alcohol-related criminal activity.” HB 1308 then divides the remaining revenue among municipalities and counties by the same formula used by HB 1294. Whereas HB 1294 simply deposits the money in the locals’ general funds, HB 1308 specifies that the locals use the hooch tax revenue for the same purposes as the state to address alcohol-related harms.

According to the above consumption data, HB 1308 would provide cities and counties with 2.5 times more money that HB 1294.

Rank	County	Population	HB 1294 payments	HB 1308 payments
1	Minnehaha	187,318	$1,772,486	$3,433,124
2	Pennington	109,372	$1,051,745	$2,078,312
3	Lincoln	54,469	$544,074	$1,124,020
4	Brown	39,128	$402,221	$857,372
5	Brookings	34,135	$356,052	$770,587
6	Codington	28,063	$299,907	$665,047
7	Meade	27,693	$296,485	$658,616
8	Lawrence	25,281	$274,182	$616,692
9	Yankton	22,616	$249,540	$570,370
10	Davison	19,903	$224,454	$523,214
11	Beadle	18,101	$207,791	$491,893
12	Hughes	17,600	$203,159	$483,185
13	Union	14,934	$178,507	$436,846
14	Oglala Lakota	14,415	$173,708	$427,825
15	Clay	14,086	$170,666	$422,107
16	Lake	12,909	$159,782	$401,649
17	Roberts	10,255	$135,242	$355,519
18	Butte	10,205	$134,779	$354,650
19	Todd	10,155	$134,317	$353,780
20	Charles Mix	9,396	$127,299	$340,588
21	Custer	8,596	$119,901	$326,683
22	Turner	8,317	$117,322	$321,833
23	Hutchinson	7,368	$108,547	$305,338
24	Grant	7,148	$106,512	$301,515
25	Bon Homme	6,984	$104,996	$298,664
26	Fall River	6,849	$103,748	$296,318
27	Moody	6,505	$100,567	$290,338
28	Spink	6,420	$99,781	$288,861
29	Hamlin	6,028	$96,156	$282,047
30	Dewey	5,742	$93,511	$277,076
31	McCook	5,625	$92,430	$275,043
32	Walworth	5,610	$92,291	$274,782
33	Day	5,571	$91,930	$274,104
34	Tripp	5,492	$91,200	$272,731
35	Brule	5,238	$88,851	$268,316
36	Kingsbury	5,001	$86,660	$264,197
37	Marshall	4,801	$84,810	$260,720
38	Deuel	4,231	$79,540	$250,813
39	Gregory	4,171	$78,985	$249,770
40	Corson	4,132	$78,624	$249,092
41	Edmunds	3,952	$76,960	$245,964
42	Lyman	3,894	$76,424	$244,955
43	Clark	3,656	$74,223	$240,819
44	Bennett	3,460	$72,411	$237,412
45	Hanson	3,374	$71,615	$235,917
46	Jackson	3,326	$71,171	$235,083
47	Hand	3,319	$71,107	$234,961
48	Stanley	2,993	$68,092	$229,295
49	Perkins	2,983	$68,000	$229,121
50	Douglas	2,932	$67,528	$228,235
51	Ziebach	2,801	$66,317	$225,958
52	Aurora	2,736	$65,716	$224,828
53	McPherson	2,438	$62,960	$219,648
54	Sanborn	2,396	$62,572	$218,918
55	Faulk	2,354	$62,184	$218,188
56	Potter	2,299	$61,675	$217,232
57	Miner	2,281	$61,509	$216,919
58	Mellette	2,102	$59,854	$213,808
59	Buffalo	2,043	$59,308	$212,782
60	Jerauld	2,004	$58,947	$212,105
61	Haakon	1,892	$57,912	$210,158
62	Sully	1,421	$53,557	$201,971
63	Campbell	1,378	$53,159	$201,224
64	Hyde	1,352	$52,919	$200,772
65	Harding	1,278	$52,234	$199,486
66	Jones	927	$48,989	$193,385

House Taxation will likely reject the Democrats’ revenue-neutral food-tax trade-off. But they will hear city and county governments clamoring for the $75 million these two revenue enhancers would give them to help them address the costs of alcohol consumption in their jurisdictions. Will House Taxation respond to the pressing needs of local governments? Or will they work to keep South Dakota’s reputation for low taxes and cheap booze? Find out Thursday morning in Room 414 at the Capitol!