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SB 1: SD Senate Leads off with Tax Increase on Boats

For a moment, I thought maybe the Occupy movement had gotten its message across to the South Dakota Legislature. The first bill in the Senate hopper calls for an increase in taxes on large boats. Take that, 1%!

Ah, but that's not just a Missouri River yacht tax. SDCL 32-3A-2 defines "large boat" as "any boat over twelve feet in length or a motorboat, used or capable of being used as a means of transportation on water, except canoes, inflatable boats, kayaks, sailboards and seaplanes." That would include most of the fishing and pleasure boats you see at the boat ramp each summer weekend. So take that, 6 or 7%!

Right now, South Dakotans pay a 3% excise tax in lieu of the 4% state sales tax. SB 1 would raise that excise tax to 4%. That tax increase, along with the elimination of the tax exemption on sales of coins, currency, and bullion (HB 1002), is all the Interim Sales Tax Review Committee could come up with this summer. Out of $527 million in annual sales tax exemptions, the interim committee mustered the courage to close just these two exemptions, thus promising an additional $332,000 for the state's general fund.

We'll see what my neighbor Scott Pedersen and his boss Butch Parks of Parks Marina have to say about this tax increase.


  1. Charlie Hoffman 2011.12.30

    Hey Larry did you know that Sioux Falls has a medium income higher than Minneapolis? Fact. Non-fiction.

    If we would think for a moment the way you do this means that if I could get Eureka up as the drunkest city in America we would have the highest medium income beating both Sioux Falls and Minneapolis!! Start your beer mugs boys.............

  2. caheidelberger Post author | 2011.12.30

    [Flag! Interesting, but you're both off-topic. Get me some stats on drunk boating!]

  3. Charlie Hoffman 2011.12.30

    Most folks wonder why so many agricultural products are off the sales tax list and I will give one reason for keeping many where they currently are. If the market is true and carries a profit needed in order to continue producing the products sent to market than a sales tax placed upon those basic items needed to produce that product would in low market price years push the growing of that product into minus profit zones. Basic raw commodities beg for a given price outside of the management zone of the producer therefore the inclusion of a government take away in the form of a sales tax will greatly lesson the chance of maintaining profitability moving forward.

    Boats on the other hand are mainly used in recreation and not the production of raw material grown for the production of food. Of course the boat owners who provide guide services for fisherman will argue with this mentality but few fisherman who hire guide services do so for the production of food and many release all the fish they catch back into the water to insure the resource continues for another day.

    "UNFLAG?" :)_

  4. caheidelberger Post author | 2011.12.30

    Three questions, Charlie:

    (1) It seems you are making an argument for a luxury tax. If we don't really need a good or service, we can tax it more, right?

    (2) If we have to craft tax policy to protect the profitability of commodity producers, why not impose an income tax rather than sales and property tax? Instead of taxing the farmers on the land and inputs they need, just tax them on the profits they make. Then when they have profits, they pay taxes, but when prices are low, they don't pay. That's better for producers and for maintaining funding for government services, isn't it?

    (3) Can we apply your commodity-producer tax-exemption logic to workers? I need food, clothing, and shelter to do my work. Why does government get to impose a sales tax on the basic commodities I need and lessen my chances of maintaining profitability?

    (Larry: great stats! Give me a moment to think up context!)

  5. larry kurtz 2011.12.30

    One piece of the context is that Sibby is right: South Dakota reacts to DC's mandates to ensure that the money keeps coming quietly but perennially.

    It's just that simple.

  6. Steve Sibson 2011.12.30

    What we have being discussed is based on the sin of coveting. Just as long as the tax is paid by someone else. How many of you would be in favor of a tax on comments made on blogs?

  7. larry kurtz 2011.12.30

    Gee, Steve: a free market demands coveting, right?

  8. Bill Fleming 2011.12.30

    Exactly, Larry. The free market is all about coveting and the redistribution of wealth.

  9. Steve Sibson 2011.12.30

    Larry & Bill, in a free market you pay for you own stuff from a willing seller. You guys are way off base.

  10. larry kurtz 2011.12.30

    Stuff has consequences, Steve. Earth extends beyond Mitchell; the effluent from that stuff is killing South Dakota lakes and watersheds.

  11. Steve Sibson 2011.12.30

    Larry, point taken, but that is not caused by coveting.

  12. Bill Fleming 2011.12.30

    Yes it is, Sibby.

  13. larry kurtz 2011.12.30

    GFP and DENR wage continual war against what South Dakotans believe are entitlements to besmirch.

    Red state failure.

  14. Steve Sibson 2011.12.30

    No Bill, stop with the deception. You can call being poor stewards if you like.

  15. Steve Sibson 2011.12.30

    "Red state failure."

    Do you mean red as in communist RINOs?

  16. larry kurtz 2011.12.30

    Is liberty an inalienable right, Steve?

    Prison inmates lose many rights to the courts that you believe are conferred by your Creator only to be taken by the government.

    Women regained the liberty to make their own reproductive decisions after the courts overturned government.

    Cognitive dissonance or manipulating the Word of God to reconcile mental illness?

  17. Bill Fleming 2011.12.30

    The entire Western Hemisphere was seized from the people who "owned" it by people who coveted it, Stevie.

    Then other people were kidnapped from their homeland and brought here to work the fields, farmhouses, estates, and factories while the entrepreneurs continued to rape the stolen land.

    Later, labor has been extracted from workers at rates at or near slave wages either here or abroad.

    Face it brother, this nation was and continues to be founded on coveting, compounded now by recruiting our nation's lower and middle class children to fight our wars for us.

    And for all of this, a fair price has NEVER been paid for it.

    Yet you have the audacity to accuse those who have been thus oppressed of coveting if they dare ask for justice.

    You really need a good rewiring job.

    All your circuits are scrambled.

  18. Steve Sibson 2011.12.30

    Is liberty an inalienable right, Steve?

    Need liver before you have liberty. Why should the preborn person not be granted due process and insted is killed in an abortion mill?

    And Bill, you can thank the Masons for those greedy acts. So now we find another point of agreement, we covet. Should we repent and work toward rightousness, or do we promote further coveting?

  19. Charlie Hoffman 2011.12.30

    Corey no one would call a 1% increase in excise tax on a new boat a luxury tax. Farmers are already taxed higher than anyone else in South Dakota with the property tax system funding counties and schools. The land ultimately pays for everything as it is the basis of wealth. Boats, cars, motorcycles, planes, and trains just move the stuff around coming out of the ground. (Sibby and LK get this for sure.)

    There was a huge experiment done in the last three years with maintaining a state with a sales/property tax vs income tax basis. The income tax states lost big time in that as revenue dropped and recession set in the income levels dropped to levels unsupportive of state needs.

    On certain goods; like Angus Beef, I'd sure vote to take all taxes off the selling of and if we could write a bill forcing everyone in America to buy that Angus Beef my angus buddies would all be fat. And if they could not afford it the Government would buy it for them. Call it "AngusFeedCare" !! :)

  20. caheidelberger Post author | 2011.12.30

    Tax-free beef? Mmm, more Angus burgers!

    I mentioned luxury tax, Charlie, because your argument above seemed to hinge on the idea that it's o.k. to tax less necessary (i.e., "luxury") items like boats and fishing vacations but we should exempt basic commodities due to their necessity to the economy. But my question about the necessary inputs for my labor stands. I produce a commodity, education, that is arguably basic and essential to the economy. I need certain basic commodities (food, clothing, shelter) to be able to produce that commodity. Do I get to exempt those inputs from the sales tax as well?

    I understand the peril in seeing income tax revenues dive in a recession. I could propose some wildly complicated reserve scheme keyed to GDP and revenue growth (whole 'nother post). But if you're saying that steady sales tax revenues are necessary to sustain a certain level of state services, then doesn't that justify getting rid of more sales tax exemptions?

    I'm curious: are there any other raw commodity producers besides farmers who meet your criteria for deserving a sales tax exemption for inputs to preserve profitability?

  21. Charlie Hoffman 2011.12.30

    Corey I am going to give this some thought. You are a very thought provoking guy. We need to get to a friends mothers prayer service in Eureka right now.

    The community of reason is somewhere we can meet and agree on. Taxation picking winners and losers surely meets my criteria for attending!

  22. Stan Gibilisco 2011.12.30

    With all this talk about getting rid of tax exemptions (at the state level) and deductions (at the federal level), who can blame people for sitting tight and scared? As if the economy isn't bad enough already!

    None of this nonsense is going to help.

    I've said it before, but it bears repeating: If we as a state really need more revenue, then our lawmakers ought to consider some measure that the people will accept. I think the people would (narrowly) approve of a one-cent increase in the sales tax rate along with a new exemption for groceries.

    Unfortunately, ideology and playing favorites seems to have gained favor at all levels of government, at the expense of the common good.

  23. Charlie Hoffman 2011.12.30

    For starters I'll get back into what seems to be the truth. We somehow voted out the State Inheritance tax thinking it would be a Godsend to Conservatism. All it really did was transfer about $100 million into the Federal coffers instead of our own every year. We used to pay it to ourselves and write it off the Federal inheritance tax bill. It all goes to the Feds now. We now need gambling revenues to close the gap. Call it Property Tax Reduction Fund or whatever you care to it goes into the General Fund and lessons property owners of their responsibility towards funding education and county needs. SD kicks in a higher and higher per student base pay and then Whamo we get hit with a recession and a Governor who finds the Huevo's to end our structural deficit program being run for seven years or so. The Stimulus just extended the pain in my mind. TARP was a totally different animal though.

    The question we must ask ourselves is does our current tax structure support what the citizens of South Dakota need and demand from State Government or do we need more. Answer that question honestly and it will answer the sales tax increase ballot measure coming in November 2012.

  24. Nick Nemec 2011.12.31

    I've always felt that agricultural inputs like seed, fertilizer and chemicals received a sales tax exemption because they were the raw materials needed for a manufacturing process, making food. Morrell benefits from a similar exemption because they don't pay sales tax on the live hogs they buy to butcher and process into ham and bacon. Those hogs are the raw material just as the feed, seed or fertilizer a farmer uses are.

    Cory presents an interesting argument. What is considered a raw material? The food he eats is arguably vital to the production of a vital product, an educated citizenry. If he didn't eat after a few days Cory would be too weak to continue to produce. Now the same argument that exempts a tax on Cory's chow would not allow an exemption on his daughter's mac n' cheese. She doesn't produce any vital product unless you consider the happiness she brings to a certain high school French teacher vital to the production of an educated citizenry. The feed I purchase for a saddle horse isn't taxed but the dog food for my pack of cattle dogs is, even though the dogs are more vital to my operation and do more work than the horses. Oh, these tax issues can get complicated. Before long we can get wrapped around the drive shaft tighter than a piece of stray wire out out on the prairie snagged by the old Ford.

    As a side note I want to thank all those people who post on this and any other blog using their own names. I've met many of you and there are some who I've yet to meet. Using your given name helps to moderate the intemperate comments and adds to the conversation. A special thanks to Charlie Hoffman, posting comments as an elected official displays a certain amount of bravery and a willingness to take hits that we need more of from our elected officials. Living in a safe district makes that easier. ;)

  25. Charlie Hoffman 2011.12.31

    Thanks Nick. Politics is temporary but living out here among family and friends like you is long term. Maybe that is why I'm called a liberal by my buddies in Pierre. I actually do care about people.

  26. caheidelberger Post author | 2011.12.31

    (Side note: agreed, Nick! Rep. Hoffman's participation here adds serious value to the conversations. But safe district? Heck, then why isn't Senator Russ Olson commenting here? ;-) )

    Nick, your junior-mac-n-cheese example makes me think of a potentially side-tracking question that my Lincoln-Douglas debate coach friends will love: is economic productivity the primary value motivating our tax policy? Should tax policy look beyond the economic value of each citizen and do more to view citizens (like my daughter) as inherently valuable human beings?

  27. Douglas Wiken 2011.12.31

    Complexity may be a problem with this, but I would like to see taxes on basic foods such as raw produce, raw meat, milk, flour, etc. I suggest leaving sales tax on manufactured "food". I guess we use some popcorn in microwave bags, but that is a convenience that should be taxed even if unpopped popcorn might not be taxed.

    All soft drinks should remain taxed.

    Those legislators enamored with protecting fetal rights, might want to exempt baby diapers from sales tax.

    The whole tax system needs to be looked at from the perspective of who benefits from the taxes compared with who pays them. Bare farm ground is not putting students into schools.

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