Maybe we could seize those Russian trust assets to cover a sales tax cut.
The House passed Representative Chris Karr’s House Bill 1327 yesterday, offering to reduce the state sales tax rate from 4.5% to 4%, erasing the tax hike imposed in 2016 to fund teacher pay increases. The House is a little nervous about dropping $143 million in revenue from the budget in one fell swoop: Karr offered and the House approved an amendment to two-step the rate cut, dropping the state sales tax to 4.25% this July 1, then dropping another quarter-point next July, yet even that incremental reduction scored only 39 ayes versus 31 nays.
House Democrats lined up behind their leader and gubernatorial candidate, Representative Jamie Smith, in voting against this tax cut. But his objection to a tax cut shouldn’t hurt his electoral chances, as his opponent, Governor Kristi Noem, also opposes HB 1327:
“Typically conservatives want to save for costs that they know they have in the future, make sure that they’re not spending more than they have and that they’re not setting themselves up for future tax increases,” Noem told reporters moments after HB 1327 cleared the House [Joe Sneve, “South Dakota Sales Tax Rollback Inches Ahead Despite Gov. Kristi Noem’s Opposition,” Sioux Falls Argus Leader, 2022.02.23].
One candidate who can make hay with HB 1327 is Republican Representative Steven Haugaard. He voted for this tax cut. He should be shouting all over Twitter that while jet-set Kristi keeps taking your hard-earned money, he’s back in Pierre doing the real conservative work of cutting taxes. But Haugaard hasn’t shouted anything new on social media since last week, and his campaign is wasting time recruiting out-of-state lobbyists to stump for his abortion-pill ban, which won’t win him traction with nearly as many primary voters as saying, “I’ll cut your taxes, Kristi won’t!”
Representative Hugh Bartels, R-Watertown, said the economic good times that South Dakota has experienced during the COVID-19 pandemic aren’t going to continue. The retired banker recalled “stagflation” when people reacted to skyrocketing prices by buying cheaper goods and less of them.
“I’ve lived through it,” he said [Bob Mercer, “S.D. House Votes to Reduce State Sales Tax,” KELO-TV, 2022.02.23].
Noem, Bartels, and other opponents do have a point: HB 1327 includes no mechanism for replacing these funds. Yet Karr insists (and my math suggests he could be right) that we can relieve the tax burden and sustain our government revenues:
“I think we need to think about those hardworking people of South Dakota — make sure they’re keeping more of their dollars when prices are high, when there are economic hard times,” Karr says. “We can still—I’ve shown you on paper, more than one year out, more than two years out—with a reasonable growth that we can do this. That government spending, that’s going to be here for several years and it’s going to keep providing stimulus for several years while we continue to grow organically” [Lee Strubinger, “House Passes Sales Tax Cut,” SDPB, 2022.02.23].
Karr will now take his fiscal argument to Senate State Affairs.