South Dakota is a conservative bunker where the first bill signed into law this year by our conservative governor was HB 1066, a 50% increase in a tax on our guests spent entirely on promoting tourism. Read that carefully: South Dakota's conservatism rejects similar tax increases to fund actual functions of the state, like education and road-building, but it eagerly approves higher taxes with which the state intervenes in the free market by buying ads for one favored industry. Yes, yes, even my artist friends think this tax increase is great... but when the folks wearing paint-spattered berets think it's a good idea, your Eurosocialism radar should ping all the harder. (Now that I think about it, Pierre is on the Left Bank of the Missouri.)
This mixed-up pseudoconservatism makes it fun to blog but hard to predict how other tax measures will fare in the Legislature. On this week's tax agenda in Pierre:
- House Bill 1154 takes another swing at removing South Dakota's tax on food. The sponsors, mostly Democrats joined by a few Republicans suffering from spasms of sensible compassion, offer a revenue-neutral plan that ends South Dakota's levying tribute on your steak and potatoes but bumps their bite of your beer, pop, and lots of other goods and services from 4% to 4.35%. We take away the regressive tax on one of life's necessities, but we increase the regressive burden on other goods and services. Fair trade?
- A bipartisan and largely rural crowd sponsors House Bill 1189, which addresses the need to fix all the deteriorating county roads that rattle their constituents each day. Alas, they aren't asking the Governor to cowboy up and spend real money on real state functions. HB 1189 passes the buck to local government, authorizing counties to levy a 0.1% property tax and townships to levy a 0.05% property tax, exempt from the state's caps, to fund road improvements. Another bill, Senate Bill 155, would pony up five million dollars in state money to fund local road improvements... but only to serve new agri-business facilities. Again, our legislators jump at opportunities to hand out favors to big-business pals, but if we want to spend money directly on the general welfare... well, build your own dang roads.
- Senate Bill 210 could rouse the biggest wrestling match. It repeals the complicated quasi-income tax assessment imposed on agricultural land by the 2008 Legislature and restores a pretty straight property tax based strictly on the market value of the land. The SB 210 formula ditches the eight-year Olympic average of the value of the commodities the land could produce in favor of the local assessor's calculation of the price that land would fetch on the real estate market, based on ag-to-ag sales of land in the neighborhood over just the last two years. Land bought up for houses and commercial development would be excluded from the assessment calculations. Senate State Affairs was supposed to take this bill up last week, but they kicked it over to Senate Ag and Natural Resources.
Still waiting for action is the Governor's plan to raise taxes (someday) on banks, a bill to give leased residential property a separate tax classification, and the anti-social plot to undermine public education by excusing home-school families from 80% of their school-levied property tax. Keep your ear to Pierre, and see what tax fairness we can wring from our legislators.
So landlords want a separate tax classification for apartments because homestead exemption gives you a break if you own your own home. We have to remember that taxes are there to fund the government. They were not put there so you could lower them to get votes like lots of politicians have done since it worked so well for Reagan.
So if the tax break for homeowners is because we want to encourage people to own their own home since they take better care of them and become more stable members of the community, then to give the same break to everyone else simply misses the point. If you want the same break, then buy your own home. We do need to fund the schools and that is what property taxes were for.
Every time someone says, 'me too' for tax breaks we need to look at what the original reason was.
Building apartment buildings is a business and they knew the rules when they got in. This would simply make the market value of their apartments go up. The rich wanting a free break. If the rules stay the same as they always were and were there for good reasons, then no one is wronged.
Apartment renters pay property tax. It's included in their rent. So, in Wisconsin, renters get a credit based on the rent they pay. The landlord is not paying the tax so it goes to the renter, not the landlord.
To the sponsors of HB1154: You may not have yet come to fully realize the awesome power of the liquor lobby. May the force be with you.
Senate Bill 210 should scare farmers and landowners. Land is now worth $10K with some sales going much higher. My best guess would be that ag land taxes will go up between 2 to 5 times their current amount if we use true value as a basis.
Michael, would the SB210 model hit farmers harder than the current productivity model?
Cory, the current system has allowed tax rates to go up more slowly than they would have if we would've gone on true valuation. Ag land has gone up 10 times what farmers were paying 10 to 15 years ago while homes in town have seen little appreciation. I would think that would mean a dramatic shift to farmers paying far more tax and homeowners in town paying less. The current productivity model takes commodity prices into consideration.
What would happen if corn and soybean prices dropped back to historical norms, crop insurance went away and the land prices stayed at $8000 to $10000+ an acre?
Would that happen, Michael? Aren't land prices stoked by commodity prices? If the bottom drops out of corn and soybeans, won't that also drive land prices back down?
I don't think land prices are going to go down. A piece of ground in Iowa just sold for over $21,000 an acre. It's not that anything that special either. This will be the going rate here in two or three more years.
http://siouxcityjournal.com/news/local/briefs/record-boyden-iowa-farmland-sells-for-per-acre/article_70ceb029-6713-5cfb-a3da-e7e491578da0.html
The land, near Kennedy Avenue and 330th Street, has an estimated corn yield of 110 bushels and soybean yield of 43 bushels, according to auction company Vander Werff & Associates Inc.
There are places land prices will probably go down. It's all about upkeep and the neighbors. Imagine what will happen to the land values around Pay Schlaw in a few years unless they put a Walmart or some big C-store out there. I'm just sayin...
HB 1154 = Good idea.
If the ballot initiative last fall (raising the state sales tax by a penny for education and special medical needs) had included a repeal of the food tax, it would have passed.
But the monkey's fist went for too many nuts, got stuck in the jar, and the monkey starved to death in the midst of plenty.
Overreaching don't pay. (Didn't Mark Twain say that?)
This bill (HB 1154) would pass in an instant if it were a ballot initiative. I suspect the margin would be something like 75:25.
Mr. Gibilisco, there are no greedier monkeys than the bad teachers and fat cat administrators in our educational system and you are right that they got their monkey fists jammed in the honey jar. I believe they may be able to realize that if they quit whining and let go their balled fists they may still get some money. It is our job as citizens to make sure that the bad teachers and the fat cat administrators get as little as possible and that the good teachers get as much as possible.
Just Don't Tax Me For Only You. If you want to tax me, make it for me too. I'm just sayin...
Speaking of greedy monkeys and the GOP leadership:
http://www.huffingtonpost.com/2013/02/02/fiscal-cliff-deal-amgen-hatch_n_2607175.html
A survey of the ice fishermen at Lake Bear Butte today indicates most were Dems but disengaged in general from politics and society in general. Next year the GOP will have a preponderance of ice fishermen in Meade County.
Saint Paul on Taxes.
http://www.youtube.com/watch?v=Mz__WI97LB8
Saint Paul on Taxes Redux (or is that Reflux?)
http://www.youtube.com/watch?v=ocOmoXCFwgM
Stan, I think you're over-optimistic on the 75–25 split. Add up the knee-jerk conservatives who will vote against any tax increase, even one offset by other cuts; Limbaugh readers who will think we're playing nanny-state by creating a pop tax; and folks who will buy the propaganda that this is a Democratic proposal hinting at class warfare, and I'm guessing you'll get 35% No. Add a few Dems who might see the increase in tax on all the other goods and services as enhancing the regressivity of the tax, and the No might reach 40%.
But I can support HB 1154 much more eagerly than I did last year's IM15.
But explain to me, Michael, why those land prices won't go down if crop prices bottom out. Will big investors keep paying top dollar for land that won't turn a profit? Analogy: when people hang onto their stocks during a downturn in the stock market, they still refuse to pay the same high prices they did during the boom years.
Interest rates! Cheap money allows investors to purchase land more easily while low rates on CD's make investors look for higher returns. Farmers have to spread out the cost of $300,000-$500,000 combines so they try to get more ground. Crop insurance has reduced the risk of losing a crop. Government mandates for ethanol production takes a third of the corn crop.
It's not unusual for a farmer to control 10, 20 or 30+ thousands acres. To put that into perspective: one individual can farm an entire township. Of course they will have to hire help.
Now just think for a minute, we now have the technology available that cars can drive down a busy highway on their own. How soon before tractors, combines, and semis do the work without anyone at the controls? We have 10 years at the outside before it will become possible for one entity to farm an entire county or more. The robotic revolution is coming to agriculture.
Cory,
A 60-40 passage will do the job.
Bring it on, I say.
Now we're getting somewhere. If the government is driving up those land costs with ethanol mandates and subsidies, then the government is doing harm and needs to get out of the market. But Noem, Thune, and Johnson aren't having that conversation.
It's not a simple problem. High land and commodity prices are having all sorts of interesting effects. Landowners are tiling fields, taking out fences and tearing out shelter belts. Hay prices are through the roof as alfalfa fields are plowed under.
I think the ethanol mandate more or less expired, but there are starving sacred cows.
Farm tractors and combines are already robotic. Somebody needs to watch to overide in case of potential problems however. But, driving straight and tight, is no longer so tedious. At least that is what I hear and see.
John Deere just slapped a CD into Successful Farming to demonstrate their new systems. I haven't looked at it yet however.
Wait a minute. What is taxed on the tourism tax?
Seems to me that if I go to a campground in Yankton I am taxed again as a SD citizen for a campground I'm already taxed for. If I go golfing, I get taxed. If I go to a concert, I get taxed. If I go to the Sioux Falls zoo, I get taxed. Skiing at Great Bear, yep another tax. Go to a batting cage, mini golf and then ride a go-cart...yep, another tax. Send our kids to a youth camp at Nesodak...yep, another tax.
Maybe take the kids into town to go to Wild Water West...yep, you are paying another tax. Go to Barnes and Noble for Rush Limbaugh's latest book...yep, the GOP thinks you should pay an extra tax to promote Mount Rushmore. Head to Hot Harley nights in Sioux Falls...yep another tax on anything you buy.
Car gets hit by a drunk representative from Pierre...yep, that car rental you need is taxed.
Oh wait, go to the shooting range and exercise my 2nd amendment right to practice shooting...yep another tax.
Let it be known that the GOP in South Dakota thinks you should be taxed for exercising your 2nd amendment rights. Want to become a good enough marksman to be a sentinel in our schools...we'll tax ya!
Corey. How much of this tourism tax is paid for by South Dakotans...you know, just enjoying quality of life in our own backyard?
Although, to be somewhat fair, 90% of that money is probably collected in the Black Hills and Rushmore. But still, we live in the eastern part of SD and we have to pay all the same taxes as someone from New York who just blows through I-90 long enough to buy gas and head to the Hills.
Was there a big out of state tourism rush in Madison while you are there in the summers, or is it the good citizens of Madison that pay these taxes? Guessing the same for people in Crooks, Renner, Hartford, Parker, Canton, Wagner, Winner, Ipswich, Platte, Salem, Nunda, Martin, Baltic, Huron and Rutland.
And now I feel bad for misspelling Cory's name. Should have got that on right!
David Montgomery's Political Smokeout story is what inspired my comments as he called Cory's bewilderment out and seems to miss the point that while the Tourism industry is calling for the tax, they are not paying the tax...just collecting it from South Dakotans and out-of-staters alike.
From David's post:
"Moreover, when tax-averse leaders support a new tax (such as the tourism surtax Cory finds bewildering) don’t overlook the key factor: that the people who pay such a tax requested it themselves. In the committee hearings on the tourism tax, tourism promoters and business owners alike emphasized how they saw the benefits of the tax outweighing the positives; conservative Republican lawmakers in turn highlighted the willingness on the part of the tourism business owners to tax themselves."
http://politicalsmokeout.tumblr.com/post/42330462297/on-taxes-tribes-and-freedom#disqus_thread
David, if they were taxing themselves and honest about taxing the locals, it would have come in the form of an income tax that they would pay themselves, rather than one they would collect from out-of-staters as an agent of the state.
Should have got that "one" right! Must be that private skooling. Doh!