A View on Regressive Sales Taxes from Bread for the World

A statement showing up in the news lately is misleading, in that “Sales tax has not been raised since 1969” is only a small peek into our sales tax history since 1969.

Consider food. In 2003 we paid 5% on groceries. Now we pay 6%. This is equivalent to 3 weeks worth of food out of a year. The tax on food went up at the city level, but the customer feels the whole 6%. State tax law changes brought this on. (Thankfully, SNAP purchases, aka food stamps, are not taxed. However, most low-income households with SNAP receive only partial allotments. They must pay the sales tax to buy the rest of their food. Some, especially seniors, receive SNAP benefits as low as $16 a month.)

Another way to raise sales tax is to expand the tax base. Many more items, mostly services, have become subject to SD’s sales tax in years 1969, 1978, 1979, 1995, and 1996. For examples: newspaper subscriptions, haircuts, taxi fares, snow removal, tree trimming, pest control, cell phone bills, cable TV, internet access, funeral services, music lessons and sports coaching, auto repair parts and labor, services of lawyers, architects, personal trainers, and plumbers, . . .  The list goes on.

Sales tax is inherently regressive and is a large factor in SD’s ranking among the “Terrible Ten” states for regressive taxes.*  I think it’s a cryin’ shame and a failure of creativity that sales tax is being considered for funds for teacher pay. Higher sales tax would raise the tax on some basic necessities and make South Dakota’s taxes more regressive!

That being said, I sincerely hope anyone possibly supporting any form of a sales tax hike would insist that the proposal include taking tax off food and heating bills. There is no tax on food in any of South Dakota’s bordering states. Only 2 of our 6 neighbor states  (NE, WY) tax home heating bills.

Note that I recommend “food and heat,” not “food and clothing”. Here’s why: Low-income people tend to spend little on clothing. Between the poor and the wealthy, there is a much narrower range of spending on food or heat than there is on clothing. I believe taking tax off clothing is more a gift to the wealthy than a help to the poor. You cannot buy used food. You cannot buy used heat.

*Some argue that being regressive isn’t so important because overall taxes are lower in SD. However, for the lowest-income 20% of the non-elderly population, state and local taxes in SD average higher than the national average.

Thank you for reading this and considering it for the sake of people burdened by our tax structure, which is stacked in favor of the well-off and against the lower-incomes. Please share this information with people who may not be informed or may not be remembering all this, especially if you see or hear the sentence about sales tax not being raised.

1 comment so far ↓

#1 Winston on 11.24.15 at 1:35 am

It is my understanding that South Dakota has the most extensive sales taxes collection system of any state in the country. That other states look to South Dakota to surmise ways to broaden their sales tax reach (We are finally # 1 at something!… ;-)).

I believe a visit to the doctor’s office is the only thing which escapes this tax in South Dakota. Although, twenty years ago, Janklow tried to pass through the Republican legislature at the time a gross receipts tax on medical bills, a backdoor sales tax should we say, but Democrats at the time successfully dubbed and defeated it with the nickname the “sick tax.”

I hope my walk down memory lane with the “sick tax” does not give the Republicans any ideas in 2016, when they finally join Obamacare and try to find a new revenue source to fund the State’s 10% responsibility in future Obamacare funding under an expanded Medicaid program… hopefully not…

But back to the germane point, thank you for writing this piece, first of all. We have become so use to the idea of a sales tax and no income tax in this state, that the regressive side of our current state tax system is often ignored and there seems to be an inherent complacency towards it by many on both sides of the aisle.

A few years ago when there was an attempt to increase spending for Medicaid and I think education by some members of the liberal community in our state through an initiative (2012), I was taken back by their funding source which was an increase in the sales tax. I think that initiative was demonstrative of how too many people in this state have come to accept the sales tax system which we have in our state, regardless of their political bent – which is very unfortunate.

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