Last updated on 2011.03.03
I'm having fun reading the I-29 Corridor analysis and growth strategy (draft PDF version available via Yankton city website). This project is then Brookings mayor, now District 7 State Rep. Scott Munsterman's brainchild to get everybody from Watertown down to North Sioux City to cooperate on economic development efforts.
The report, prepared by Regional Technology Strategies of North Carolina, highlights a number of state and local tax incentives and recommends continued efforts in that fiscal direction. The report does not discuss an option at the other end of the fiscal spectrum that could support I-29 Corridor development: regional taxes.
Zach Patton notes that as the economy becomes more regionally integrated (exactly the motivation and goal of the I-29 Corridor project), communities may benefit from casting a wider net to pay for the public-sector services they share:
As an example, [U. of Illinois professor Michael] Pagano points to his own city, Chicago, where thousands of workers stream downtown every day, consuming services such as road maintenance and fire and police protection. Indeed, according to census estimates, Chicago's population swells by about 5 percent during the workday. In other cities, that disparity is greater. San Diego's daytime population jumps nearly 12 percent, and Dallas and Houston each see their populations rise by about 20 percent during the day. That added population benefits from city services, but other than local sales taxes, they don't really pay for them [Zach Patton, "Making the Case for Regional Taxes," Governing.com, February 2011].
The I-29 Corridor report shows similar phenomena happening in its bailiwick. The number of Lake County residents who work in the County dropped from 70% in 2002 to 58% in 2008. In Union County, fewer than half of the residents work in-county. The commuting isn't all one-way: even Minnehaha County is seeing more residents drive out of the county to work (though in 2008, the number of Minnehaha residents working in-county was still a region-high 83%).
The Patton article focuses on the desire of the cities to access more tax dollars from commuters to cover the city services they enjoy while at work. But those cities also profit from those workers without paying for the public services provided by the bedroom communities that comfortably house those workers for the two-thirds of the year they aren't at work. It would be fascinating (and beyond my breakfast-time capabilities) to analyze taxes and services per citizen in the I-29 Corridor by workplace and residence to see if there are any imbalances we might rectify with regional taxes and shared services.
The regional tax idea has been working in the Twin Cities since the 1970s. Under the Fiscal Disparities Program, the seven counties around Minneapolis and St. Paul share 40% of the growth in their commercial-industrial tax base. Thus, when the Anoka Chamber of Commerce convinces a new office complex to move to its industrial park rather than to Apple Valley, the folks in Apple Valley still get some sugar. Communities can still compete for new business, but in the Twin Cities, regional tax-base sharing recognizes that a new business in one community is a net win for the entire region...
...which is exactly the spirit in which Scott Munsterman conceived the I-29 Corridor project. The I-29 Corridor report itself is a result of regional taxpayer cooperation: various municipalities contributed $117,500 to fund RTS's study. When everyone in the region benefits (and I assume there will be benefits) from the study, everyone should chip in. If the I-29 Corridor is to work together on attracting residents and industry and further integrating our economic activities, a regional tax could ensure proportional contributions and support economic and cultural improvements throughout the region.
Hmmm. I read the single comment in the article you cite, Cory, with the words "casting a wider net." (Of course by the time other readers see that article, opposing comments might exist.)
I'll bet Rapid City officials would salivate at the notion of Sioux Falls imposing a city income tax. Black Hills businesses would love an I-29 corridor income tax.
The property taxes in Lead might constitute a bit of a disincentive to potential relocators, but heck, you can't have everything.
Federal income tax, federal self-employment tax, federal value-added tax, state income tax, state sales tax, city income tax, city sales tax. Sounds like Small Business Utopia, and a great thing to laugh at from a new home in Ecuador.
I'll acknowledge the commenter's sentiment toward local control, Stan. I like being able to make decisions close to home, and indeed, that would be a demerit to any plan where we might provide services (e.g., road maintenance, school administration) on a multi-county level.
But note how the Twin Cities regional tax-sharing plan works. If I understand it right, they don't ncessarily decrease local control, and they don't add a tax on top of any local levies. They simply pool 40% of tax collected on new development and share that money equally among the member entities. It's kind of like the NFL... or like South Dakota's system of state aid to education. That plan by itself doesn't make taxes higher in the Twin Cities than in neighboring regions. It also makes possible more equal development and provision of services within the region.
Okay, got it! I was reading the article and noting the situation in Ohio, where (if I understand it right) some cities levy an income tax.
I am as much concerned about paperwork burdens and the difficulty of compliance, as I am about actual tax rates.
Every hour, every minute, every second that a business spends in compliance and paperwork represents one less second, one less minute, one less hour that the business can spend serving its customers.
I've been listening to "Dakota Midday" a lot, and they're really hammering on Gov. Daugaard. Are they doing this on my dime? They did interview the Governor, but is he getting equal time as he should in a fair public venue?
More near the original topic, I should say that South Dakota's tax code is a little too regressive in my opinion; we ought to do away with the sales tax on food, prescription medications, and essential medical supplies, and increase the rate enough to make up the lost revenue. That measure would involve no more paperwork and no more overall tax burden.
We should figure out a way to get every citizen who owes use tax to ante up. Maybe Gov. Daugaard can make a public plea to that effect, with the promise that any such funds thereby collected can go straight to K-12 education.
Stan, I'll vouch for SDPB's fairness. They have indeed given the Governor time on the noon program, along with live coverage of his two big speeches and a full hour on the South Dakota Focus TV program. Statehouse on TV also offers more coverage of the doings in Pierre than any other media outlet, broadcast, print, or Web. Their audience may skew moderate/left, since those folks can't find any balanced news/talk on AM.
Indeed, there are some cities that do income tax. And yes, I would agree that there is an inherent disadvantage to adding one more tax form that businesses have to fill out. The Twin Cities tax-sharing plan avoids that problem and keeps the paperwork at the administrative level. If a region were to impose a new tax, it would have to make clear to its citizens and businesses the new and improved services provided.