Accounting for 2016 Rate Hike, SD Sales Tax Revenue Barely Outpacing GDP Growth

Former SEC chairman and Orange County GOP Congressman Chris Cox twits South Dakota and Attorney General Marty Jackley for telling the U.S. Supreme Court that South Dakota is losing sales tax revenue and thus should get to collect sales tax from out-of-state vendors. Cox says South Dakota is rolling in dough:

The state’s own data show that sales and use tax revenue grew from $787.7 million in 2013 to $974.7 in 2017—considerably faster than the state’s rate of economic growth. The governor’s budget for 2018 projects the state’s sales and use tax revenue will be more than $1 billion, 4% higher than last year, with no change in rate. That’s 29% higher than five years earlier. Sales-tax revenues have been booming in other states, too [Chris Cox, “Sales Tax Revenue Isn’t Collapsing,” Wall Street Journal, 2018.04.19].

Governor Dennis Daugaard’s chief of staff Tony Venhuizen says Cox didn’t do his homework:

This @WSJ op-ed by Chris Cox claims that SD’s sales tax revenue is “booming,” but completely ignores that SD increased its sales tax rate from 4.0% to 4.5% during the time he cites. Pretty embarrassing – the guy didn’t do his homework. https://t.co/VsCFwuYXqC

— Tony Venhuizen (@Tony_Venhuizen) April 20, 2018

We jacked our sales tax from 4% to 4.5% in June 2016 to pay our teachers more. Venhuizen is thus correct that comparing 2013 revenue with 2017 revenue is inaccurate without considering those different rates. To properly gauge the purchasing power (the Governor’s term) of our sales tax, we need to divide revenue by percentage, calculate growth in per-point revenue, and compare that rate with GDP growth.

But, but, but—using Cox’s figures on sales tax and BEA figures on GDP:

1. In 2013, each percentage point of state sales tax generated $196.9 million.
2. In 2017, each percentage point of state sales tax generated $216.6 million.
3. Per-point revenue increased at an annual rate of 2.41%.
4. In 2013 Q3, annual SD-GDP stood at $44.486 billion.
5. In 2017 Q3 (most recent avaliable), annual SD-GDP stood at $48.810 billion.
6. Annual SD-GDP, measured at Q3, increased at an annual rate of 2.35%.

By these figures, our sales tax revenue has grown faster over the last four years than our economy (which, Kristi Noem reminds us, has been stagnant lately). But that sales tax revenue growth has only been 0.06 percentage points higher than GDP growth, which falls considerably short of the “considerably faster” growth that Cox claims.

Cox does poke at South Dakota in the way I’d expect from more conservative Republicans. He balks extending one state’s regulatory power into other states, questions why we don’t enforce sales tax law on our own citizens first, and calls on “judicial conservatives” to “think twice” before “upending decades of commercial reliance” on Supreme Court rulings. But when Cox predicates his argument on the premise that South Dakota is getting basic facts wrong, Cox’s own failure to present an honest picture of our sales tax revenues undermines his persuasive power.