Facing a Republican Party committed to character assassination and a majority of voters who appear to tolerate it, the South Dakota Democratic Party has made the sensible tactical move of emphasizing initiative and referendum to win policy battles. Ballot issues are harder to personalize and thus harder to defeat by assassinating one candidate's character. Less distracted by personal attacks, voters can better see the good sense of the policy proposed.

That's why the SDDP's Initiated Measure 18 to raise the minimum wage may have a better chance of winning a majority vote than any Democratic candidate in the state. Raising the minimum wage has 61% support in South Dakota. IM18 has majority support in every age group and income group. It even wins 48% of South Dakota Republicans. The current $7.25 minimum has a third less purchasing power than the $1.60 minimum had in 1968. It will be hard for the Republicans to overcome that support that that glaring economic inequity by calling SDDP exec Zach Crago names.

In the policy-over-personal-attacks spirit of the initiative, I suppose I shouldn't try to support the minimum-wage increase by calling Governor Dennis Daugaard a hypocrite. But  Republican blogger John Tsitrian connects the dots to reveal an inconsistency in our Governor's policy thinking on the minimum wage and the gasoline tax.

Recall that Governor Daugaard opposes the minimum wage increase:

Gov. Dennis Daugaard, a Republican, also responded negatively to the proposal.

"This issue should be based on economics, not politics," Daugaard said in a statement. "There needs to be an analysis of how many jobs would be lost" [David Montgomery, "Dems Planning Initiated Measure to Raise Minimum Wage," Political Smokeout, 2013.07.17].

Economics provide a pretty good basis for raising the minimum wage. Governor Daugaard so far seems unconvinced. But he sounds like an economist when justifying his just-about-face on raising the gasoline tax:

“When I ran for governor four years ago, I promised that I would not support tax increases, and I have kept that promise. I want to participate in a discussion about future transportation needs, however, without taking any options off the table, including proposals to restore the purchasing power of the gas tax,” he said [Bob Mercer, "Daugaard: Willing to Consider Increasing State Highway Taxes," Aberdeen American News, 2014.05.21].

Governor Daugaard wants to restore his purchasing power for building and fixing roads. So why, asks Tsitrian, doesn't our good and gracious Governor want to restore the purchasing power of minimum-wage workers?

My beef about all this isn't the gas tax, per se. I'm just dismayed by the notion that cost-of-living increases need to be considered when pencilling in the price of government services but are to be ignored when it comes considering raises in the minimum wage. If Daugaard believes that jacking up gas taxes doesn't amount to a tax increase, just a restoration of buying power, then shouldn't that same principle be applied to minimum wages? Applying the Governor's own reasoning, raising minimum wages isn't the same as increasing them, it's just a matter of restoring their buying power. Yet Daugaard has effectively ignored this logic and withheld his support for the cost-of-living increase (with its built-in adjustment for inflation) that will appear on November's ballot.

It all looks to me like Daugaard believes state government should consider getting a cost-of-living increase but working people shouldn't. I don't like this. It's illogical. It's inconsistent—and it comes across as institutionalized cognitive dissonance [John Tsitrian, "Sure, Governor Daugaard...," The Constant Commoner, 2014.07.09].

Institutionalized cognitive dissonance—that's still a gentler attack than any of the personal slime Dick Wadhams will throw on behalf of South Dakota Republicans against Democratic candidates. Truer, too.

But Democrats don't need to go there. We don't need to campaign against Dennis Daugaard (or for any particular Democrat, for that matter) to convince a majority of voters to do what they already think is right: raise the minimum wage and index it to inflation so that even the lowest-paid workers can get a fair shake.

23 comments
Who needs highways when I've got a horse!

Who needs highways when I've got a horse!

What?! Kristi Noem still hasn't fixed the Highway Trust Fund? What do we pay our Congresswoman for?

While Kristi's colleagues fiddle with short-term stopgaps to fill our potholes, a new study funded by the Soybean Transportation Coalition suggests that a long-term fix may rely on some tax judo: ease drivers into a long-term gasoline-tax increase with an immediate tax break.

The federal gasoline tax has hung at 18.4 cents per gallon since 1993. Back then, that would have been about an 18% tax on gasoline. Today, 18.4 cents per $3.75 gallon is about 5%.

The soybean lobby suggests knocking a penny off the gasoline tax as a political palliative but then indexing the gasoline tax to inflation to keep up with the cost of concrete, steel, and everything else we need to build and maintain roads. Their study, conducted by the Indiana University School of Public and Environmental Affairs, says that inflation-indexing would make up for the lost revenue of the penny drop within four or five years. The study finds that South Dakota would take a $6.7-million hit in the first year, but we'd recoup the loss by 2019. By 2025, we'd accumulate $119 million in extra revenue ($25.9 million in 2025 alone) while paying 3.4 cents more per gallon.

Governor Daugaard will tell you that raising more money through the gasoline tax by indexing it to inflation is not a new tax or a tax increase; it's just restoring the purchasing power of the gas tax. Alas, the cut-then-index plan would extend the road budget bind for another couple years before road-building states would see any progress. Is additional fiscal pain (and rump pain, as you bounce over those potholes) really the only way we can coax Kristi and Congress into fixing the Highway Trust Fund?

74 comments

Last month, Minneapolis-based Medtronic acquired a big Irish corporation so it could create a new headquarters on paper in Dublin and pay Ireland's lower corporate tax rate.

The financerazzi call the Medtronic move inversion. Democratic candidate for Senate Rick Weiland calls it flat-out wrong:

What happens in Inversion is a company moves its headquarters to another country - such as Ireland - to avoid paying taxes. Meanwhile, they continue to receive all the other benefits of being an American company. They, in-effect, renounce their citizenship, which is really odd since the Supreme Court keeps telling us that corporations are people!

It's flat out wrong these companies are fleeing the country to avoid paying taxes but expect to face no consequences.

...I say no more. No more to Inversions. No more to corporations masquerading as people. No more payouts to big money special interests [Rick Weiland, press release, 2014.07.08].

Did I just hear Weiland say he rejects the idea of corporate personhood, just like his friend Elizabeth Warren? Wow! That's one more reason for Lawrence Lessig and the MaydayPAC to use South Dakota's Senate race as a testing ground for their challenge to big corporate money in politics.

As Weiland spends his morning on Minnesota Avenue, I hope he's jawboning voters about the ills of inversion and the absurdity of corporate personhood.

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Our friends from Billings gaze lovingly on Sioux Falls and conclude that the Minnesota-esque policies of adding a tax and building infrastructure are good for economic development. But even if you think South Dakota's low-taxes philosophy still gives us an advantage over Minnesota, we still can't compete with Ireland. Rather than uproot, Medtronic is staying in the beautiful Twin Cities, paying $42.9 billion to acquire Irish surgical-device maker Covidien, and simply moving its headquarters on paper to Dublin to get a lower corporate income tax rate.

But wait: the boss says taxes aren't the prime mover here:

While the deal will allow Medtronic to reduce its overall global tax burden, the Minneapolis-based company said it was driven by a complementary strategy with Covidien on medical technology rather than tax considerations

"The real purpose of this, in the end, is strategic, both in the intermediate term and the long term," Medtronic Chief Executive Omar Ishrak said in an interview after the deal was announced. "It is good for the U.S. in that we will make more investment in U.S. technologies, which previously we could not."

Medtronic's corporate tax rate, now at around 18 percent, won't change much, Ishrak said [Susan Kelly and Greg Roumeliotis, "Medtronic to Buy Covidien for $42.9 Billion, Rebase in Ireland," Reuters, 2014.06.16].

Maybe Medtronic's CEO is just trying to downplay the the unpatriotic business of trying to dodge taxes. But he and his 8,000 employees will stay in Minnesota and keep paying Minnesota state income taxes, as will the 1,000 new workers Ishrak says Medtronic will add in the next five years.

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Governor Dennis Daugaard just spotted his opponents five points. Maybe ten.

In 2010, candidate Dennis Daugaard promised no new taxes:

A recession is not the time to raise taxes. I will not raise taxes as governor. I will not support any new taxes or any increases in existing taxes. I would only consider a tax increase in response to an emergency, such as the temporary gas tax increase to pay for snow removal after the blizzards of 1997 ["Dennis Daugaard on Tax Reform," OnTheIssues.org, downloaded 2014.05.22, citing 2010 Gubernatorial campaign website daugaardforgovernor.com, 2010.11.02].

In 2013, the GOP spin machine cheered Governor Daugaard promised no new taxes and meant it. Governor Daugaard's staff reaffirmed that promise:

Daugaard made a commitment during his 2010 election campaign that he wouldn’t raise taxes except for an emergency.

Transportation Secretary Darin Bergquist said that hasn’t changed.

...“The governor is willing to discuss the state’s transportation infrastructure needs, but he intends to keep the promise he made to the voters in 2010 that he would not raise taxes,” [spokesman Tony] Venhuizen said.

“He hasn’t even announced that he’s running for a second term. He’s been pretty firm on controlling taxes and spending and that’s unlikely to change,” Venhuizen added.

There was a final statement that perhaps summed it all up. “The governor has never said that he would change his position on taxes,” Venhuizen said [Bob Mercer, "SD Governor to Keep Fuel Tax Vow," Prairie Business Magazine, 2013.04.26].

In 2014, Governor Daugaard says he will support raising some taxes:

“South Dakota’s highway system is currently in good condition. However, the state has seen the purchasing power of the gas tax go down over time, because we tax gasoline per gallon rather than per dollar. That means that, unlike the sales tax, gas tax revenue does not go up with inflation,” Daugaard said. “I also know that many county and township officials believe that local road funding is also an issue.

“When I ran for governor four years ago, I promised that I would not support tax increases, and I have kept that promise. I want to participate in a discussion about future transportation needs, however, without taking any options off the table, including proposals to restore the purchasing power of the gas tax,” he said [Bob Mercer, "Daugaard: Willing to Consider Increasing State Highway Taxes," Aberdeen American News, 2014.05.21].

Restore the purchasing power of the gas tax—who writes this stuff? I guess that's how we Democrats need to sell our plans on Capitol Hill: We need to restore the purchasing power federal income tax among higher-income earners. Wow! That really does sound better than saying, We need to raise taxes.

Permit me an analogy. 26 years ago there was a tall, gangly Republican who had promised "No new taxes" to get elected. But then he changed his mind and said he was o.k. with some new taxes. When he ran for re-election 22 years ago, he weathered a noisy but mostly ineffective challenge from a radical conservative in the primary. But breaking the "no new taxes" pledge weakened that President politically. A cranky old Independent peeled some votes away from him, and he lost to a fiery Democrat.

Joe, Susan, have a beer. Have two. On Dennis.

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We've all heard GOP Senate candidate Mike Rounds's risible vow to eliminate the Department of Education. Rounds repeated that empty promise in last week's candidates' debate. Pish posh: he won't fight for that Republican talking point any more than he'll repeal the Affordable Care Act.

But suppose he weren't kidding. Suppose Mike Rounds actually planned to turn the words wheezing through his plastic smile into action. What would happen?

As Bob Mercer points out, a tax-pocalypse for South Dakotans:

One of the candidates for federal office said last night he wants to eliminate the U.S. Department of Education. For the coming school year, that would be a loss of $191.9 million to the state Department of Education; the money for the most part gets passed down to local schools and cooperatives. Replacing that sliver of federal aid alone would require approximately 1.5 cents of additional state sales tax [Bob Mercer, "How About a Really, Really Big Tax Increase?" Pure Pierre Politics, 2014.05.16].

$191.9 million—recouping that loss would require a 15% increase in our general fund revenues. So when Mike Rounds says he wants to eliminate the Department of Education, he's saying he wants to increase our state taxes 15%.

Stace Nelson and Larry Rhoden probably can't make much hay out of that point, but we Democrats sure can. Whoo-hoo!

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I'm having fun reading the Harstad Strategic Research survey of Millennial voters in the context of the points made by our Republican Senate candidates in last night's debate. A viewer asked the candidates how they respond to Nobel Prize-winning economist Paul Krugman's contention that we don't need to worry so much about the national debt, that we can carry the current debt load with normal economic growth. Mike Rounds said Paul Krugman needs to go back to school. Rhoden, Ravnsborg and Nelson joined Rounds in folksy assertions of kitchen-table economics. We can't spend money we don't have, they all intoned... although a majority of American households (69%) spend money they don't have on houses, cars, and other items. (Quick show of hands: how many of you GOP candidates are paying mortgages?)

If we really want to talk kitchen-table economics, consider that median household income in 2011 was $50,502. Median household debt was $70,000. The median ratio of debt to income in 2011 was 1.39.

Meanwhile, the national debt in FY2013 was $16.7 trillion. The national GDP in 2013 was $15.7 trillion. The national ratio of debt to income in 2013 was 1.06.

In other words, Uncle Sam is carrying less debt proportionate to income than most families are carrying in mortgages and car payments. If we ran our federal budget like the median household, we could plunk $5 trillion in stimulus into the economy tomorrow and reach the same debt-income ratio as Mom and Pop.

In further kitchen-table inconsistency, Jason Ravnsborg says we have to lower our debt by cutting taxes. Once again, pass the bacon and the household budget: when we see debt or other expenses increasing in our family budget, we never say, "Gee, we should address this problem by making less money." We generally look for ways to take in more money. So is Ravnsborg telling us that government budgets really don't work like household budgets? Or is he just confused?

The Millennials surveyed by HSR are less worried about the difference between macroeconomics and microeconomics and more worried about just solving problems. Consider their take on raising taxes. 54% of the age 18-to-33 respondents said they favor raising taxes "to pay for priorities like education, health care, and fixing roads, bridges and other infrastructure." But only 42% said they favor raising taxes "to pay down the national debt."

Just like most Americans, Millennials think avoiding debt is less important than taking care of basic needs. Their responses on tax increases suggest that they understand that debt is a normal and manageable part of American life, in government and at the kitchen table.

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Mr. Tsitrian directs our attention to the latest refutation of the South Dakota GOP's fantasy that their low-tax policies attract residents and businesses. The Center on Budget and Policy Priorities grinds through all sorts of data to tell us South Dakota's lack of an income tax and other purportedly pro-business tax policies won't reliably boost our economy through migration:

  • Interstate migration has declined over the last three decades, from a peak of 3.2% of Americans moving across state lines in 1990 to just 1.5% moving interstate in 2013.
  • Among that small fraction of Americans changing states, jobs, family, and weather swamp tax policy in driving migration.
  • From 1993 to 2011, South Dakota experienced net out-migration of 2.5%, about 5,000 households.
  • The average gross income of folks moving out of South Dakota was about $5,000 less than folks who moved in and $12,000 less than folks who stayed. The average income of the movers out is just about the same as the average wage for South Dakota teachers. Hmmm...

Whatever is making people move to South Dakota, it's probably not tax policy.

23 comments

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