G. Mark Mickelson sponsored Initiated Measure 25, the buck-a-pack tobacco tax hike, with the promise of putting up to $20 million a year into vo-tech tuition relief. In its fiscal note released last month and included in the 2018 Ballot Question Pamphlet (one of the most fun and useful documents our Secretary of State publishes), the Legislative Research Council says tobacco users will volunteer to pay $24,942,542 a year in IM 25 tax. The unreliable big-money political-machine opponents of IM 25, as well as both the Republican and Democratic parties, claim IM 25 will raise $35 million in new revenue.
Now the GOP spin blog is trying to attack IM 25 for its business cronies from the other direction, citing USD economics instructor Travis Letellier’s conclusion that LRC’s math is off:
“Their assumptions will probably not bring in anywhere near $20 million because they are assuming people will not change their behavior by raising taxes,” Letellier said. “They are assuming they will still be getting all this revenue, the same amount of revenue that they got the last time they raised the taxes on cigarettes.”
Letellier said his concern with this assumption is that elasticity changes over time and tobacco taxes haven’t been raised in South Dakota since 2007.
“There is a different pool of people now and you are changing their tax rate again. I don’t think you can assume that this group of people will have the same reaction as the last group of people did,” Letellier said [Lexi Kerzman, “USD Economics Professor Discovers Error in South Dakota Tobacco Measure,” USD Volante, 2018.09.18].
GOP spin blogger Pat Powers amplifies Letellier’s concern by headlining that IM 25 “…Won’t Bring in Anticipated Revenue.” Powers thus seems to be contradicting the claim of his biz-party cronies who are screaming that IM 25 taxes people too much and making it sound like House-exiting Mickelson is taxing people too little.
But in his haste to throw the latest handy mud at Mickelson’s tax hike, Powers ignores the remarkable assessment of Letellier’s boss, USD dean of economics Mike Allgrunn, who says LRC’s economists are usually pretty sharp, and that this time, even when they’ve screwed up, their screw-ups still add up to a pretty good answer:
Allgrunn said he believes there is either an error in the explanation or the numbers. He said he predicts the numbers the government projected will not be that far off.
“They made enough mistakes in their math, that by the end they were right,” Allgrunn said. “It bothers me that they are doing economics in public and it’s incorrect. Bless their heart, they are trying to do the right thing and I applaud that. But it does appear to me that there is an error.”
Allgrunn said South Dakota is one of the top states of predicting tax revenue and that mistakes like this one are uncommon.
“South Dakota to be fair I think a really good job to estimate those taxes, not perfect because nobody is,” Allgrunn said. “South Dakota generally tries to do a really good job at predicting the revenue, sometimes they error a little bit, usually on the conservative side” [Kerzman, 2018.09.18].
Powers’s choice to headline the conclusion of a visiting instructor and ignore the somewhat different conclusion of USD’s economics chair epitomizes the cherry-picking nature of Trumpist Republicans’ approach to serious scholarship. This disagreement also shows another problem with the strange statutory limitation of LRC fiscal notes on ballot measures to 50 words or less: if LRC had been able to publish its full economic assumptions and analysis, economists and other curious citizens could better track and challenge LRC’s calculations.
But the main headline from Vermillion appears to be this: two economists from USD see errors in the IM 25 fiscal note, but while the instructor says the IM 25 tax hike will fall short of $25 million, the econ chair says $25 million is pretty close. We await the analysis showing the opponents’ claim of $35 million.