Half-penny sales tax should be deleted

Some of what we covered during “Veto Day” included Bills to reduce taxes. Unfortunately, those Bills received no support from the Governor’s office and were defeated.  

One of the proposed Bills on Veto Day was drafted to reduce the “2016 Half-Penny Sales Tax”. When that Bill passed in 2016 – by a very narrow margin – it passed with an ‘amendment’ that was not well drafted and has been a point of contention over the past six years. The reason for that is the tax increase was to be reduced, and ultimately removed, as we received increasing amounts of ‘remote sellers/internet’ sales tax. The formula for doing that was not clearly drafted within the Amendment. Then the “Wayfair” sales tax case was decided and even though we had new-found sales tax, there was disagreement as to how we would account for those new sales tax amounts and then how we would reduce the half-cent increase.

There has been an ample amount of sales tax revenue obtained since 2016 to account for the ‘internet’ sales tax reduction. However, government has an insatiable appetite for revenue and that is what is holding up the tax reduction.  

As an alternative to the half-cent sales tax reduction Bill, this year there was a Bill to eliminate the sales tax on food purchases, but that Bill was also defeated. There seemed to be relatively broad support for the idea of removing the sales tax on food, as it is truly a ‘regressive tax’, but, again, there is a reluctance to see any tax revenue slip away.

We often claim that we are a ‘low tax state’. However, that claim is often based upon the fact that we are one of only a few states that does not have an ‘income tax’. (As I mentioned above, an income tax would only fuel the fire of increased state spending.) The fact is we do have plenty of other taxes, including, but not limited to, a 1.) 4.5 percent state sales tax, 2.) 2 percent municipal tax, 3.) 2 percent excise tax, 4.) 1 percent tourism tax, 5.) severance tax, 6.) bank franchise fees, 7.) 142 boards and commissions with their own fees and expenses, 8.) exorbitant real estate tax, 9.) and the list goes on.  

So, it appears to me that now would be a good time to right-size some of our tax burdens. There are many viable options to find an appropriate tax structure that will not increase the overall revenue but would take a careful look at sources of revenue as well as necessary exemptions. Our tax structure has not been thoroughly reviewed for over 35 years.

Real estate values are spiking, and real estate taxes will stay on a steep climb for the foreseeable future. The real estate tax burden on all land ownership needs to be reviewed, but especially so on low-income, fixed-income, and ag/ranch land.  

Hopefully, there will be a more careful review of our tax structure in the coming years, but that requires “political will” and full-time attention to the state. The state does require revenue to serve what should be its limited responsibilities. So, we must find the most equitable and least burdensome way to do that.

Please go to www.sdlegislature.gov to see what else is coming up in state government during the interim.