In ruling out tax increases as a remedy for our state budget deficit, Governor Dennis Daugaard has said that a recession is the worst time for raising taxes. I would agree that a recession makes it harder for workers and owners to afford a tax hike.
But raise taxes we did in 2010, and it worked. Bob Mercer runs some useful numbers on the tax increase that saved our state unemployment insurance system:
Employers paid $27.7 million in surcharges in 2010. The surcharges were in addition to the $45.5 million of contributions and interest paid by employers into the system. By comparison, in 2009, employers paid $25.7 million into the system.
For 2011, the Labor Department estimates that employers will pay $47.2 million of contributions and interest into the system.
The bottom line is the changes made by the Legislature amount to an annual tax increase of more than $20 million for South Dakota businesses [Bob Mercer, "The Big Tax Increase Politicians Don't Mention," Pure Pierre Politics, 2011.01.14].
If I'm reading that right, employers saw a 185% tax increase in their unemployment insurance in 2010. This increase restored a fund that went insolvent paying out $63.6 million in 2009.
I don't harbor some inherent love of taxes (that's the fantasy meme of lazy debaters on the conservative side). I do love paying the bills.
Just as we had more unemployed neighbors who needed our help last year, we currently have more neighbors on Medicaid. We have just any many neighbors with kids going to school and neighbors themselves going to college and vo-tech to pick up new job skills and get better jobs. And after another hard winter, we're going to have a lot of roads to fix.
We can slash the budget and leave those neighbors out in the cold. Or we can dig deeper, pay our bills, and maintain the public services that form the basis of a healthy economy and society. The tax hikes that salvaged South Dakota's unemployment insurance fund show that we can pay the bills without destroying the economy.
We have a sales-tax and property-tax funded state government. While reducing unnecessary spending should be our first choice, a short-term half-penny or full-penny state sales tax increase should be part of the discussion as a bridge with sunset clause. With tourism and lodging as one of our top industries, a large portion of the burden would be paid by vacationers who are used to paying much higher sales tax fees in other states.
Collect sales tax on internet and catalog sales and we would have plenty of money. All those packages delivered by UPS from Amazon and others last Christmas could've helped fund our schools.
BTW - "Use Tax" is required to be paid by SD residents. Businesses pay use tax on their purchases because we are informed by the Dept of Revenue to do so. Those pesky sales tax audits keep us honest.
Has anyone here paid their use tax on personal purchases?
If we can get good Republican Rod to advocate a sales tax increase, we're on to something. Rod, can you straighten Russ out?
Michael, how about this practical alternative: let's impose a delivery tax. UPS, FedEx, DHL... how many other deliverers are there? a handful? Require them to collect an extra 4% on deliveries. They pass the cost on to us, of course. But then instead of trying to enforce tax law on a few hundred thousand individual pruchasers, you collect from maybe a dozen vendors at most. That captures due revenue from every Internet sale of a physical object. (Curious: do we collect tax on downloads to e-readers?)
Gentlemen,
State government doesn't receive any property tax revenue contrary to Mr. Goeman's statement. As for taxing Internet/mail-based commerce, South Dakota has been trying for decades and participates in the national effort to put the tax into effect, but not enough states have agreed.
I'm afraid I'm not a typical Republican when it comes to raising tax revenue, especially for a short-term fix. I don't see solving our budget woes as a party issue. It's a people issue. Should we drop the budget cuts on the backs of our children when we're sitting on hundreds of millions in reserves? No. I willingly paid my 185% tax increase last year to help rebuild the unemployment fund because we all needed that fund to be secure for our people. For Governor Dennis Daugaard to say, "No new taxes" is premature and short-sighted. If it means keeping road and bridge construction projects moving, getting another 2% of our workers back to work and making sure we don't put our budget woes on the backs of our K-12 students, I'd gladly promote a short term sales tax bump along with state government reductions. It would help us survive this downturn as a State with less overall economic pain. Using a portion of our reserves which are held for a rainy day should also be in the mix. Every governor has complained about school districts holding reserve accounts, yet the State of South Dakota holds more of our money in reserves than all schools combined.
To Gov. Daugaard's credit, he has said he wants to lift the caps on K-12 reserves and let schools control how much they save up for their rainy days.
As for state reserves, why yes, if this budget shortfall isn't a rainy day, I don't know what is. One can read Daugaard's willingness to preach austerity early as a sign of political courage, But do we need such "courage" when the reasonable course of reserve spending is available to avoid significant harm to our schools and arguably our economy?
I know of a construction company who received and application for employeement and offered that applicant a job. The applicant then confessed that he was not really looking for a job he is just fullfilling the contact requirement for unemployment benifits. He told the potential employer that he was doing just fine collecting his unemployeement benifts while doing nothing.
I am really happy Corey you are so pleased that government can fleece businesses with a 185 % tax increase so this lazy sum-bag dead beat can stay at home and do nothing.
I have no sympathy for deadbeats like that, and I hope there is a way for the employer to report the guy and save the state some money. At the same time, the tax increase helped protect the solvency of a program that does a lot of good for honest workers and their families who hit hard times through no fault of their own and who are making a good faith effort to get back to work and not milk the system.
Michael:
Yes, I, for one, paid use tax. Just completed the return yesterday and plan to mail it today (if the weather lets me get out). I spent about $1,800 on Internet purchases so, with the 4-percent state and 2-percent city tax, I owe about $110.
Because I run a small business, I must have a license by law, and therefore I cannot get around paying the use tax. I'm happy to do it, too -- and I wish everyone would.
Those who agitate for tax increases or new taxes might do well to make certain that they pay the taxes they already owe. Render unto Caesar, and take the beam out of thine own eye ... say I, in a fit of self-righteousness.
Hey Cory, I miss the "Preview" feature in the comments program. Or is it just a Google Chrome omission?