State Revenues Shoot Up; Retail Charging Ahead on Stimulus

So that’s why Kyle got a raise….

In a victory for Governor Kristi Noem’s blind optimism, South Dakota’s tax revenues in July exceeded revenues from July 2019 and the wildest hopes of the Legislature. In the pleasant summer of 2019, July receipts totaled $171.9 million. Last winter, the Legislature budgeted on the assumption that this July we’d take in $182.3 million. The Legislative Research Council reports we raked in $201.4 million:

Revenues in July were up 17.2% from last year’s haul and up 10.5% from the Legislature’s projection because South Dakotans are buying more stuff, building more stuff, smoking more tobacco, and even mining more gold. The only things it looks like we’re doing less of are drinking hooch and paying taxes on our stock portfolios.

But LRC isn’t breaking out party hats yet. They see strength in the retail sector but weakness in the services sector due to coronavirus. LRC worries that the expiration of enhanced unemployment benefits and lack of further government stimulus checks could produce “a depressed trend in taxable sales.”

LRC also notes an interesting disjoint in retail: the sales on which we impose sales tax were up 12.2% this June over last year, while gross sales were down 7.9%:

We’re still buying lots more groceries and eating out less, and we’re still going bonkers at Menards and Runnings on garden and home improvement supplies. But sectors like clothing and dining and drinking out which took a huge hit in April are recovering in South Dakota, reducing their year-over-year losses in June to single-digit percentages:

Hotels and motels still did 33% less taxable business in June 2020 than June 2019; movie houses are down 51%, and membership organizations are down 92%. Overall service sector taxable sales were down 7% in June.

The hotel/motel decline is also reflected in declining tourism tax. That extra penny tax brought in 34.6% less in June… but hey, that’s only a difference of around $600,000 compared to a net sales tax gain of over $19 million in July. And let’s be P-O-S-I-T-I-V-E—tourism tax is up, up, up from its April slump of 69.4%!

But that darn LRC must not have gotten the positivity memo: they predict tourism receipts will remain below 2019 levels through September. And it’s going to take more than Kristi Noem’s optimism or Donald Trump’s flaccid and unconstitutional usurpation of Congress’s authority to tax and spend. Let’s hope she gives everyone in Pierre, not just her son-in-law, a 5% raise to support more spending and more sales tax revenues.