The SD ‘Food Tax’ Dilemma

Trust me, I don’t stand out on street corners holding a sign that says ‘End the Food Tax’ but I do think eliminating the tax, at least partially would be a good idea.

So why am I bringing this up months before the legislative session? Well it seems there may be winds of change blowing on the issue in Pierre this year.

The other night I ran into a state representative, and let’s just say this, we are on ‘talking terms’. One of the topics of conversation was ‘legislative’ proposals. They had a great idea; eliminate the food tax on fresh fruits and vegetables at farmer’s markets to encourage healthy eating habits. I liked where this person was going with the idea, so I told them they should go a step farther, and eliminate the food tax on all fresh foods and preparable foods (i.e. milk, flour, eggs). I told them that Bread for the World has been fighting this fight for years in the legislature, but maybe if they teamed up with a legislator that wasn’t a Democrat, they might get somewhere on the issue.

They gave me that normal right winger scowl you often see when you ask them to be bi-partisan. They did say they would take that into consideration. I hope so, I already told Bread for the World about your proposal. Teamwork kids! Teamwork!


#1 Tom H. on 11.21.13 at 1:44 pm

Does anybody have an idea of how much the sales tax rate would have to be increased to make this proposal revenue-neutral? 0.5%, maybe?

#2 Detroit Lewis on 11.21.13 at 1:46 pm

Actually, that was a part of the conversation. I said the simple solution would be to tax everything else at the same rate. If I am paying a 6% tax on food, shouldn’t cars and RVs be taxed at that rate?

#3 Fred on 11.21.13 at 1:51 pm

What are the arguments for a food tax?
-We all need to eat and since we have no state income tax (which is a non-starter discussion-wise) the food tax is a predictable, stable source of state and local revenue stream.
-those with limited income use SNAP so pay no food tax on SNAP purchases

What are the arguments for eliminating the food tax (all or in part)?
-the food tax is regressive tax leading those with the least income paying a disproportionality higher portion of taxes.
-Eliminating the food tax would bring economic relief to those with the least resources and enable them to direct funds toward other needed items.
-people need to eat and taxing food makes that difficult for those with few resources

Other issues/information
-SNAP is there to supplement food purchases (Supplemental Nutrition Assistance Program).
-current SNAP finds available to people is about $4/person/day
-SNAP recipients use cash to purchase food on top of using SNAP and pay tax on that food
-how can purchase of healthy food items be promoted?
-how can purchase of unhealthy food items be discouraged?
-how can regressivity be addressed?
-Food banks and feeding agencies cannot do that needs to be done to provide food relief

Ways to address 1)regressivity, 2)maintain a state and local funding stream, and 3)promote good food choices?
-eliminate food tax addresses 1
-keep system as is addresses 2
-remove tax from certain healthy foods addresses 3
-institute a state earned income tax credit (percentage of federal earned income tax credit) addresses 1 and somewhat 2

It seems that the question focuses on how do have an equitable tax system and continue to have the needed revenues flow into state and local governments.

It is good to see that there is discussion on this. Keep it up.

#4 Detroit Lewis on 11.21.13 at 2:09 pm

I was glad to see someone other then a democrat talking about this.

#5 Tom H. on 11.21.13 at 2:36 pm

Maybe I’m ignorant, but are automobile sales not taxed at the standard sales tax rates?

#6 hornguy on 11.21.13 at 3:05 pm

Here’s a better way to make it revenue neutral. Implement a GD income tax with a reasonably high deduction so only high-income earners are paying it. BOOM.

Although wait, all the rich people here have convinced all the poors that the lack of income tax actually BENEFITS them. Silly poors. Get your heads out of your behinds.

#7 Detroit Lewis on 11.21.13 at 3:10 pm

I agree HG. I have suggested household incomes over $250,000.

#8 hornguy on 11.21.13 at 3:11 pm

Tom, there’s no sales tax on automobiles here. Instead, you pay a 3% excise tax to the state when you acquire a vehicle.

#9 Tom H. on 11.21.13 at 3:36 pm

Okay, so cars are taxed a 3% (instead of 4%) and, I assume, are similarly exempt from local sales taxes (like SF). But, since it’s an excise tax, people are supposed to pay it when they move to state even if they bought the car elsewhere, I believe. That brings the revenue up a bit, so I’m not sure if eliminating the 3% excise tax and replacing it with a 4% sales tax would really add all that much revenue.

#10 Detroit Lewis on 11.21.13 at 3:42 pm

Tom, that is just one example, there are several products/services in SD that are not taxed at the 4% rate.

#11 Detroit Lewis on 11.21.13 at 3:43 pm

And why isn’t advertising taxed?

#12 hornguy on 11.21.13 at 7:22 pm

Tom, the excise tax is waived provided you paid at least 3% to another state when you purchased the vehicle. So unless you bought the vehicle in a state where there is neither a sales nor excise tax on vehicles, like Oregon or New Hampshire, your car can be titled here without paying anything additional. If you didn’t, the treasurer will assess the 3% based on the present blue book value of the car.

DL, I’m sure that advertising tax is the first thing Craig Lawrence will be pushing when the legislature reconvenes.

#13 pathloss on 11.21.13 at 7:33 pm

No food tax. I’m tired of trips to Minnesota grocery stores. I’m tired of poaching pheasants and stealing field corn. Some of us count pennies. Sioux Falls adds pennies that become millions in new taxes.

#14 Tom H. on 11.21.13 at 7:40 pm

Well, here in Minnesota we have no food tax (on unprepared food – restaurants are still taxed), but they tried to raise more sales tax revenue last year through a mix of (a) sales taxes applied to services (e.g., advertising, haircuts, parking fees) and (b) implementing a sales tax on individual clothing items over $100. (Clothing is also not taxed in Minnesota.)

I liked the clothing one because it’s pretty progressive: if you bought a single clothing item costing, say $120, then you would pay sales tax only on that last $20 (the first $100 is exempt).

#15 Joan on 11.21.13 at 8:09 pm

I don’t think clothing should be taxed, as well as food. Beauty shops charge tax, anyway the ones I go to. I think advertising should be taxed and political advertising should be taxed higher. When I was young and single my aunt, uncle, and I did quite a bit of shopping in Pipestone. I got several nice items of clothing there and in Luverne. Back then there was quite a good selection of merchandise in the stores in those little towns. I also think there should be what used to be called a luxury tax on items like jewelry, make up(even the low priced items). I don’t know what else had the luxury tax on it, my guess would be furs. But until that tax was removed the jewelry and make up were the items I was interested in. I would go so far as to say luxury vehicles and boats should be taxed. The luxury tax went to the federal government. I oculd name a few other items that aren’t taxed highly enough, but I don’t want to start a war here.

#16 Detroit Lewis on 11.21.13 at 9:54 pm

A luxury tax is fantastic! When then councilor Bob Jamison was pushing for a cable tax I emailed him and said it was a great idea, but why stop there? Tax all things ‘luxury’ and ‘not needed’ at a higher rate’. Maybe his modem was down, because he did not respond.

#17 rufusx on 11.22.13 at 1:07 pm

There are enough things and services that are sold in SD that are exempt from “sales tax” that if they were taxed – it would triple the states revenues.

#18 Detroit Lewis on 11.22.13 at 1:51 pm

The legislature reviewed the list last year to see if they could increase some of them and the lobbyists went freaking beserk and won in the end.

#19 Muqhtar on 11.22.13 at 5:16 pm

So there is currently no sales tax levied on clothing in Minnesota. But now Gov. Mark Dayton, as in *that* Dayton family, who has made billions over the years selling clothing with no sales tax in Minnesota, wants to burn down the house behind him and now implement a clothing sales tax. Now that the Daytons have sold out of the retail business, well, they have no skin left in the game, so why should they care?

I see three themes when people come to Minneapolis to go shopping for clothes: 1) They want to go to the Mall of America; 2) They love love love no sales tax; and 3) They buy a lot of other stuff with it – hotel rooms, meals in restaurants, sporting events, amusement parks, etc. He will kill all that tourism income with this. Dayton has never had a real job in his life and never had to worry about how the “little people” live. It’s like watching C. Montgomery Burns as a politician.

#20 Detroit Lewis on 11.23.13 at 12:58 pm

Typical salesman, live for the profits today, not tomorrow.

#21 Tom H. on 11.25.13 at 9:16 am

Well, Muqhtar, as I explained, Dayton’s proposed clothing tax (which he rescinded after bipartisan backlash) would only have assessed sales tax on individual items over $100. So, if you went to the MoA and bought 10 pairs of jeans that cost $99 each, you would pay no sales tax. If you bought a coat costing $150, you would pay sales tax on that $50 of that coat which is over $100 (about $3.60 in tax). It’s not that bad.

I understand that people in SD are probably not super plugged in to Minnesota politics, but calling Dayton a Monty Burns-style politician is pretty ridiculous. He’s basically been pretty centrist – moderate tax increases, a truly balanced budget (no gimmicks), and pushing strongly against Voter ID and gay marriage bans. If his Republican rival (Emmer) had been elected, Minnesota would have been Wisconsin 2.0 under Scott Walker.