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Mitchell Paper Endorses Referred Law 14 on Wishful Thinking

The Mitchell Daily Republic editorial board is really bad at political arguments. They have endorsed Referred Law 14, Governor Dennis Daugaard's "Large Project Development Fund, based entirely on hopes and wishes.

The Mitchell editors acknowledge the very clear problem of the lack of accountability in corporate welfare program: the bill hands over 22% of the contractors' excise tax to an unelected board under the Governor's thumb to redistribute to wealthy corporate donors however they please. That's strange: the lack of Legislative oversight is a big reason the Mitchell editorial board has come out against Referred Law 15, the extra-penny sales tax for K-12 education and Medicaid.

Apparently the Mitchell paper is much less eager to invest tax dollars in schools and hospitals than it is to give handouts to private businesses. They say all of the potential benefits outweigh the risks:

...we feel that attracting big business to South Dakota is imperative to our state's future. We acknowledge that often, it takes money to make money.

Could the Large Project Development Fund be the key to bringing the next great employer to Mitchell? Perhaps, and with that hopeful view through such optimistic glasses we therefore give our approval to Referred Law 14 [editorial, "14's Potential Outweighs Concern of Future Trouble," Mitchell Daily Republic, October 25, 2012].

The Mitchell paper offers hopes and wishes, but no proof that we need Referred Law 14's handouts to attract businesses to South Dakota. Consider this evidence (evidence, Mitchell editors!) from Massachusetts:

States don't do much better when they use tax breaks to try to lure specific companies. In the wake of the Evergreen fiasco, Massachusetts officials formed a Tax Expenditure Commission to review the Bay State's web of tax breaks, also known as "tax expenditures."

The commission pegged overall foregone state revenue from tax breaks (not just those for businesses and economic development) at an estimated $26 billion this year, more than the total amount of tax revenue the commonwealth expects to collect during the fiscal year. And a 2011 analysis by the state auditor of 91 business tax breaks offered that year found that only a few came with mechanisms for reviewing their effectiveness or recovering lost revenue if the breaks failed to produce the hoped-for economic benefits [Charles Chieppo, "Rolling the Dice with Taxpayer Money," Governing, October 25, 2012].

South Dakota is in the same boat, needlessly sacrificing tax revenue to draw businesses that likely would have come here anyway. The best example is TransCanada. It was going to build the Keystone 1 pipeline through eastern South Dakota no matter what our tax policies were. Yet we've surrendered to them $6.9 million in contractors' excise tax refunds. We get no net gain from that refund; it's pure Christmas gift to a foreign corporation.

The Mitchell editors also fail to consider that Referred Law 14 is a huge increase in corporate welfare. RL 14 diverts 22% of the excise tax to this corporate welfare slush fund. In fiscal year 2012, South Dakota took in $83 million in excise tax. RL 14 would thus redistribute $18.3 million to deep private pockets. The program RL 14 replaces has given out $92.8 million over 16 years, or about $5.8 million per year. Maybe we've accelerated our handouts recently, but on average, Referred Law 14 would more than triple the amount we pour into these economic development grants.

Now the Mitchell editors can argue that Referred Law 14 would thus do three times as much good as the current excise tax refund program. But three times zero is still zero. Corporate welfare is the worst kind of trickle-up redistribution of wealth. Vote No on Referred Law 14, and keep your tax dollars going toward schools, hospitals, and other proper public functions.


  1. Brother Beaker 2012.10.26

    So much for being one of the 21 smartest cities in the world! It was a short run, but a fun one.

  2. Donald Pay 2012.10.26

    This seems to be another ALEC inspired privatization project. Scott Walker did a similar "deform" in Wisconsin, where he transferred authority for taxpayer funded economic development over to a similar private-public board. It's been a disaster---lack of transparency, incompetence, failure to follow the laws. Better kill this before it costs you money.

  3. Steve Sibson 2012.10.26

    Today they also endorsed RL16.

  4. Taunia 2012.10.26

    "But three times zero is still zero." Cory's also a math teacher? Give that man a raise.

    Who are today's Job Creators? Consumers. Who are tomorrow's Job Creators? Schools/teachers/education. Investing zero today into tomorrow's zero me out, Cory.

  5. caheidelberger Post author | 2012.10.26

    Careful, Taunia: you're getting close to dividing by zero, which every good algebra student will tell causes a rift in the spacetime continuum.

  6. Douglas Wiken 2012.10.26

    Alas, the spacetime continuum gets no respect anymore.

    Republicans aren't showing a whole lot of respect for truth, but with no truth that supports their retrograde obstructionism, they have only lies to rely on.

  7. Owen Reitzel 2012.10.26

    They also were against IM15 and were for RL16-whick explains Graves in the paper every other day

  8. caheidelberger Post author | 2012.10.26

    They're for 16? Grrr! No wonder they haven't called me for an interview. :-)

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