House Taxation’s hearing on SB 86 started normally enough yesterday, with Senator Jeff Partridge (R-34/Rapid City) sonorously urging the panel to clarify and roll back his 2016 sales tax amendment and make optional the promised sales tax rate reduction based on new remote-seller sales tax revenue. Senator Partridge tendered an amendment to make SB 86 sound a little firmer: instead of saying that Joint Appropriations “may” introduce legislation reducing the sales tax rate based on sufficiently high revenues, Partridge is willing to see SB 86 say Joint Appropriations “shall” introduce such revenue. Partridge still isn’t mandating the rate reduction, the way the 2016 Partridge Amendment intended; changing “shall” to “may” only requires that the Legislature have the debate.
Partridge had the Noem Administration behind him, in the form of Revenue Secretary Jim Terwilliger, who said SB 86 is fine with him. He got the Chamber tandem, State and Sioux Falls, in the form of the Owen tandem, David and Debra, to say go for it.
Former gubernatorial advisor quickly-turned lobbyist Nathan Sanderson said the Retailers Association opposes changing the sales tax rate every year, which requires “cost, time, energy, and effort which our retail members would prefer not to go through.” Sanderson said retailers were able to adapt to the two sales tax rate changes since 1969, but the blanch at jiggling their rates every year. “It’s a real pain in the butt,” said Sanderson.
Senator Partridge said his Backtrack should “solve” the Retailers anticipatory agony by removing the automatic rate change his 2016 Amendment envisioned and offering the Retailers and everyone else a chance to debate any possible rate change.
House Taxation asked a few questions. Then hapless Democrats spoke up. Representative Ray Ring (D-17/Vermillion) moved, and Representative Linda Duba (D-15/Sioux Falls) seconded, a hoghouse substitute amendment to strip Partridge’s language and replace it with Nesiba’s 2018 language assigning every $20 million in new remote-seller sales tax revenue to reduce the tax on food by one percentage point. Ring and Duba also included language to exclude tobacco, alcohol, pop, vending machine chow, and dietary supplements from that break. “You all know how important it is to reduce the sales tax on food,” said Rep. Ring, “because we have a very regressive tax structure, and this would help to reduce the regressivity.”
And then, by gum, the hapless Dems had some hap. Republican Representatives Dennert, Pischke, Schoenfish, Mills, and Chris Johnson backed the motion. Republican Representatives Willadsen, Reed, Olson, David Johnson, Duvall, and Chaffee opposed it. That’s 7–6. Amendment passes.
Shocked by the bipartisan success of a Democratic ploy, Rep. Kirk Chaffee (R-29/Whitewood) tried deferring the new food tax break to House State Affairs, where Republican Speaker Haugaard and Republican Majority Leader Qualm would surely stamp out this outbreak of progressive taxation. Rep. Kyle Schoenfish (R-19/Scotland) sensibly (!) pointed out that even as amended, SB 86 is still a taxation bill, perfectly within House Taxation’s wheelhouse. Chairman Willadsen urged the committee to boot the bill over for another hearing, but the Ring Ring resisted, and the motion to State Affairs failed. The best the balkers got was a motion to defer action until the next House Taxation meeting—[UPDATE 21:29 CST: Ah! But then Rep. Qualm went to the House floor Thursday afternoon and got a majority to support his motion to refer SB 86 to House State Affairs. So much for letting the committees decide bills themselves. As Cathy notes below, SB 86 comes up bright and early Monday morning, 7:45, in Capitol Room 414, before the House State Affairs Committee that the cranky Majority Leader Qualm chairs.
Senate Taxation killed Nesiba’s food tax reduction plan with kindness last year, with Republicans acknowledging that using the remote-seller tax windfall to give South Dakotans a few pennies off peanut butter sounded pretty good. Apparently the wisdom of cutting the food tax has sunk in with a few Republicans. Let’s see if that wisdom can withstand a long weekend of cussing out by the Majority Leader and the Speaker and reach the House floor.