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South Dakota Gov Doesn’t Like Tax Exemptions

South Dakota Governor Dennis Daugaard
South Dakota Government

South Dakota Governor Dennis Daugaard is explaining his dislike of sales tax exemptions being proposed by various special and not-so-special interest groups at the state capitol. He sent out the following column to local media outlets:

Eroding Our Broad Tax Base 

                            A column by Gov. Dennis Daugaard:

Many states tax the sales of goods.  A few also tax services. South Dakota has a broad-based, four percent sales tax on nearly all goods and services.

Because past legislators and governors have maintained the broadness of the tax, it is a steady, reliable source of revenue, even in times of economic distress.

Broadening this tax base helped Gov. Janklow cut property taxes 30 percent. Taxing the sales of a broad array of goods and services also helps our state avoid an income tax.

However, an ever-present temptation exists to ask for exceptions. Interest groups come to Pierre each year to argue for a tax exemption on their particular goods or services. They are supported by their lobbyists and members.

These exemptions do not have policy goals, other than relieving a particular group from paying sales tax. They are not designed to attract new economic activity or help create jobs.  Some interest groups have better arguments than others, but one fact is always true: Each time an exemption is created, it benefits a narrow group at the expense of all other South Dakota taxpayers.

Even if some exemptions are small, the principle of a broad-based tax is violated.

Each time an exemption is carved out, there is less revenue for priorities like education, healthcare, or economic development. For each exemption, we send a message to the next interest group that they also should try to avoid paying sales tax.

I vetoed legislation last year that would have exempted the sales tax on hay for livestock bedding. Several exemptions have been proposed this year, including certain coaching services, some rodeo admissions, and sales of used truck tires. Certainly these are very small exemptions, proposed by groups for whom I have empathy. Still, I must oppose the erosion of our broad sales tax base through repeated, minor exemptions that ignore our overarching policy goals.

I truly believe that we should strive for more TAXPAYERS, not more TAXES or higher rates. Spreading the burden among many makes each one’s burden lighter.  We should not continue to chip away at our steady, broad tax base. It’s easy to agree with each group and make an exception “just this once.” But we must be vigilant against it.

Voters, taxpayers and the public in general don’t have an association, interest group, or lobbyists. As your Governor, I believe it’s my responsibility to speak for the people. It’s my job to work on behalf of the unorganized many against the interests of the organized few.  Let’s keep our tax rates low by asking everyone to share in the responsibility to pay.

A strong majority of legislators in Pierre are Republicans, as is the Governor. Don’t expect any strong effort from them to over ride his stated position.

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