Last updated on 2013.02.17
Rep. Frank Kloucek and fellow District 19 Democrat Alan Fenner aren't just campaigning for themselves. They are taking time to fulfill the first duty of a candidate: leading a public conversation about the important issues facing the community. To that end, they are hosting informational meetings on the seven ballot measures South Dakota voters face this fall. They hosted three such meetings last Thursday, in Scotland, Tyndall, and Salem. Kloucek and Fenner host their next session on the ballot measures this Thursday, October 25, at 8 p.m. at the Pony Creek Steakhouse in Parkston.
We know that Kloucek and Fenner oppose Referred Law 16, as do the Republicans (Rep. Stace Nelson and freshly converted Republican Kyle Schoenfish) in the House race. I contend that any candidate foolish enough to advocate Referred Law 16, the Governor's really bad plan for merit pay and more standardized tests in K-12 education, stands to lose five to ten points at the polls.
Thursday's meeting will be a good chance for District 19 voters to learn about RL 16 and the other six ballot measures they face along with their candidates. One point of information I offer to that conversation pertains to Initiated Measure 15, the extra-penny sales tax proposed to fund K-12 education and Medicaid. The major problem with this proposal is that it imposes a regressive tax burden.
I got to wondering what would happen if we flipped the tax rates on the income brackets. After all, if we can consider imposing a new 1.1% tax on the lowest income quintile while adding only 0.3% to the tax burden of the upper income quintile, we could just as fairly consider imposing the same tax rates in reverse, right?
Here's what happens when I fiddle with the numbers from the South Dakota Budget and Policy Project:
| income bracket (quintile) |
average income |
Regressive Indiv rate |
Avg add'l tax paid |
New revenue | Progressive alt rate |
alt add'l tax paid |
alt revenue |
| bottom 20% | 11000 | 1.10% | $122 | $12,211,742 | 0.30% | $33 | $3,303,176 |
| second fifth | 27000 | 1.00% | $260 | $26,025,024 | 0.70% | $189 | $18,918,191 |
| middle 20% | 46000 | 0.80% | $371 | $37,135,707 | 0.80% | $368 | $36,835,419 |
| fourth fifth | 70000 | 0.70% | $462 | $46,244,466 | 1.00% | $700 | $70,067,372 |
| top 20% | 184750 | 0.30% | $603 | $60,383,061 | 1.10% | $2,032 | $203,420,597 |
| Total: | $182,000,000 | Total: | $332,544,755 |
Alas, the initiative process doesn't give us the chance to propose amendments. But consider: if we could rectify the greatest flaw of IM15 by flipping the tax rates on income groups to a more progressive structure, we'd raise and additional $150 million, 83% more than the proposal on the table will.
Typical Marxist approach that violates the sin of coveting. And we wonder why there is so much division in politics.
The main reason why we don't need IM15 is the $47 million left over in FY2012 and put into reserves. And the nearly $100 million of extra spending in FY2012 that was not originally budgeted.
Cory, how on earth would you administer a program such as this one?
How would you determine the incomes of the various taxpayers?
What about people like me, whose incomes not only fluctuate wildly from year to year, but do so in an unpredictable way?
My take: Great theory for an ideal world, impossible to carry off in the real world.
I voted "No" on IM15, by the way. But if it had exempted groceries from sales tax (for all five cents on the dollar, not just for the new one cent), I'd have voted "Yes."
If this measure fails, maybe they can try again with the "grocery tweak." And forget about making promises that the legislature not only can't keep, but probably does not intend to keep, i.e., earmarking the funds for special interests.
Wanting a fair tax structure is Marxist? You are a riot Sibby. If we rewrite the tax code to say all doctors and teachers, just as an example, no longer have to pay any SD taxes, you would oppose it right? Would that make you "covetous" for opposing bad policy just because there is a beneficiary to the bad policy?
Steve, characterizing tax policy as "coveting" is inaccurate. I govern from behind Rawls's veil of ignorance, in which I formulate policy with an eye toward practical justice and with no eye toward which position I may occupy in that society, rich or poor. We need money to run a just and healthy society. We need to obtain that money in a way that imposes bearable burdens on all citizens. Wealthy citizens can bear greater burdens than poor citizens. A progressive tax system is thus more logical and fair than a regressive tax system.
Stan: totally possible. State income tax. Every South Dakota gets a state income tax form along with the 1040. That form has three lines and a chart.
Line 1 says "Enter your taxable income from your 1040."
Line 2 says "Multiply that amount by the percentage indicated in Chart A" (which is a properly modified version of the chart you see in this blog post).
Line 3 says, "Send the amount you got in Line 2 to Pierre."
Easy.
Maybe when this regressively-tax-me-more thing happens and then drives insaner changes by the legislatures and then this income tax happens it will bring about a flat tax.
Flat Tax. You pay x%. I pay x%. You should not be punished for making more than me because you are a great teacher getting bonuses or a doctor who went to college.
Careful with your terminology, Nick. A flat tax as typically referred to by the GOP is a sales tax, which is actually regressive.
At this point I could live with a flat income tax scheme if it also taxed unearned income, capital gains, dividends and carried interest at the same rate and included FICA tax paid as a deduction. It will never happen though because Mitt and his cronies don't think they should have to pay the same rates as you.
Flat income tax.
Exclude unearned income. You already earned it, now it's working for you.
If I work as a greeter at Walmart and pocket a few bucks I should pay the same X% that you young hardworking fellows do as you rake in the cash. You should pay the same as me sitting there greeting people. Everybody should pay the same.
disclosure: I no longer work at Walmart. I am not "people friendly" enough.
Progressive tax rates are not punishment of success. They are recognition of the proportionately greater ability to bear the burden of a higher tax rate when you are rich. Think of it this way: suppose you make $30K and I make $300K. You and I need about the same amount of food, water, clothing, and shelter. Maybe because I indulge my tastes and need fancier shoes for my fancy office where I make my $300K, I spend four times as much on my "necessities" as you do. Suppose your necessities cost you $25K, meaning I spend $100K. Now impose a flat percentage tax on income, say, 10%. You pay $3K; I pay $30K. We pay our taxes and our necessary bills, and you have $2K left for beer and skittles and emergencies; I have $170K left. The flat income tax takes 60% of your cushion; it takes 15% of mine. A progressive tax more fairly cuts into the utility we each enjoy from our wealth.
You make me consider your option, sir. I would like more beer and skit money.
...or at least some money to put in savings in case of an emergency. Think of it this way: under your flat tax, you have enough cushion left for one major car repair, while I have enough cushion left for replacing three cars and my daughter's kidney. (O.K., maybe just a big down payment on that kidney.)
The point is that tax burden isn't just the dollar figure. It's the relative utility (or liberty?) each taxpayer surrenders.
I'd support a state income tax ... maybe ... but only if the sales tax were completely abolished so that we had a system like the one in Montana.
Cory, I agree with your argument in support of a progressive rather than a flat tax.
Thanks, Stan! I've told you from the beginning of our acquaintance that, given the opportunity, I'd rewire the South Dakota tax machine to replace the property tax and sales tax in their entirety with a state income tax. Practically, we might need to keep a mix of taxes for that three-legged stool or diverse portfolio I seem to recall some fiscal experts talking about. But while the scheme I describe in the original post notes how we could easily generate more revenue, I would consider it a policy victory to replace regressive taxes with progressive taxes while remaining revenue-neutral.
SD needs a "blue-ribbon" tax commission to look both at who pays all types of taxes and who benefits from all kinds of taxes and then make some attempt to rationalize the system. Add a state personal and corporate income tax to the mix and tie all taxes into a ratio system so that an increase of any tax causes a proportionate increase in other taxes. That might reduce the GOP preference for taxing the guy behind the tree and not me.