20 thoughts on “SD Ranks #3 in regressive taxes (H/T – Helga)”
So, the only thing that matters when it comes to taxes is that the rich pay the same percentage of their income in taxes as poor people? If we simply confiscated an additional 9.5% of the evil 1 percent’s income we would have a perfect tax system?
Well, it certainly isn’t fair right now. Sales taxes are regressive, because they punish those who can afford them the least. Why do you think that over 40% of SF school kids are on FREE and reduced lunches? Because so many working families in SF are doing so well? SD has over 13,000 millionaires, 4.3% of the population. Imagine if they were paying a 11.60% of their income towards taxes? That’s 1.5 Billion Dollars compared to the $299 million they are paying now. We wonder why we can’t fund education, roads and state government, maybe we should start taxing people fairly.
Unfortunately no system of taxation is perfect. You could also show similar charts that show the percentage people pay for housing or food or clothing or medical care or gasoline and you would find it is also a higher percentage for lower income earners than it is for upper income earners, because most things in life are based upon fixed costs rather than tiered rates.
The debate comes in when you attempt to define what is “fair”. Should the wealthy pay the same effective rate as the middle class and the lower income? If so, does that mean they benefit more from the roads and police officers and fire departments and public schools as do people of lesser means? Not really. So is it really “fair” to punish those who just happen to have more disposable income?
Keep in mind I’m not claiming I know the answer. However I don’t envision a system where Hy-Vee charges you based upon your income where a can of corn might only cost me $2 but it would cost T.Denny $425, and I’m sure most would agree such a system is silly. So why do we think of taxes in a different light?
Things will always be ‘unfair’ depending upon your interpretation. The fact our state does not have an income tax will always create a wider gap than states that do have income taxes, but I suspect there is also another factor at play here that pushes us above several other states that don’t have income taxes. That is the fact we are home to a large number of reservations where the average income is far below the poverty level.
I’m sure you already know that out of the 11 poorest counties in the entire nation, we are home to 6 of them including 4 of the top 5.
We’re number one in something! (And number two, number four, and number five)
Therefore, these ultra-low income residents skew our tax numbers quite a bit, because as a percentage of their income, the sales tax is significant. Add in fuel taxes and property taxes and you can quickly see how the numbers work against someone who is near the bottom of income earners. For someone who makes less than $10k a year, every penny is significant, and it doesn’t help that alcohol and cigarettes are taxed at a higher rate***.
***Hoping everyone agrees and understands that it is well documented and known that those of the lowest income are more likely to drink and smoke and the percentage of income diverted to these items is exponentially higher than it is with middle and upper class income earners. Sad fact… but true fact.
So the solution is what exactly? Tax the wealthy more? Tax the poor less? Both of the above? I think you will soon find that no matter what we do, inequality will remain. There is no miracle cure here, and if you really want to get technical you will find when federal taxes are added in these very same low income people actually get back more money than they pay in which offsets some of the burden from the state.
Wikipedia? Does anyone remember when Reagan quoted the Readers Digest as a source?
Greg – I have often believed that the state needs to make changes to the tax system.
My proposal would be simple;
• Eliminate Video Lottery
• Eliminate sales taxes on food and clothing
• Tax EVERYTHING else at the same 4% rate (like RV’s, boats, cars etc.)
• Implement a state income tax on families making over $250,000 a year.
DL, don’t forget a corporate income tax too. The bank franchise tax is nothing but an corporate income tax on banks. This tax did not stop the growth of one of the biggest industries in SD over the past 30 years, so why not tax the other corporations as well. It did not stop Citi from coming to SD, nor Sears, Bank of New York, or Wells Fargo.
Craig – the issues isn’t equality – it’s equitability.
DLewis – you know there are far more retail sales exempt from sales taxes in SD than those that it is charged on – right? If everything sold to an end user were taxed – the sales tax rate could actually be cut from 4% to 2%, and property taxes and VL could be eliminated and we’d have the same budget numbers.
I have a good hunch that you can look to the rural wealthy for the source of the regressive tax. The greatest amount of wealth in this state is in our countryside and they are the most subsidized.
Nice reporting… A report I did not see in any of our locals.
LJL – You won’t see the media covering this, because to them, the rich walk on fricken water.
Ruf – I have heard that before. Also, the social costs of VL, IMO, far outweighs what we take in on it. I think eliminating VL would actually save the state money.
@Winston – yes wikipedia. The neat thing about them is they actually list the original source. In this case the actual data came from: Statistics derived from U.S. Census Bureau data; U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business; and DataQuick Information Systems, a public records database company located in La Jolla, San Diego, CA.
Neat huh?
@ L3wis – why the hatred towards video lottery? Shouldn’t people have the right to gamble if they so choose? Even if you eliminate it people will still gamble but instead of the state collecting taxes from it, the money will be diverted to the tribes or to the operator of a gambling website.
As to the proposal to eliminate sales taxes on food and clothing while taxing everything else at the same rate, it might work but I’d need to see numbers to see how feasible it is. People generally aren’t fond of paying taxes on healthcare either, so when you take food, clothing, and medicine away… you are slashing a huge piece of the pie. Not sure the numbers would work at 4% and I’d be afraid we would soon be paying 9 or 10% sales tax on the remaining items. Interesting idea though and perhaps if only items below $100 were exempt it would be more feasible (because for some reason I can’t support elimination of tax on a $280 pair of Armani jeans or a $450 pair of Jimmy Choos just because they are considered “clothing”).
The income tax on people making over $250k is interesting, but at what rate? We need to keep in mind that if we wish to start taxing the wealthy or taxing corporations it will have an effect on our ability to attract businesses here. I hate even typing those words because it sounds like a talking point from John Thune (aka: Job Creators), but it is a sad reality. Companies come here because of our tax benefits – it surely isn’t because of the weather, culture, or scenery.
Executives would be less willing to relocate here if the taxes were nearly as high as they would be in Florida, Texas, or Arizona, and if you can’t get the executives, you can’t get the companies.
Craig, Why not quote original sources rather than primary sources?
I mean, “rather than secondary sources?”
Winston – are you a primary source?
Rufusx, If I have personally experienced it I am. Otherwise it is my opinion.
Because a nice clean table is easier to understand than page 437 of a PDF which is then compared against cell G56 of an Excel spreadsheet.
Talk about missing the point.
Ah, I see. So anyone who has ever paid a tax on anything is an expert on tax policy. Got it.
Nope. But I find it a little disconcerting that someone who is homeless in SD pays a higher tax rate on their income then a millionaire. I’m just saying.
So, the only thing that matters when it comes to taxes is that the rich pay the same percentage of their income in taxes as poor people? If we simply confiscated an additional 9.5% of the evil 1 percent’s income we would have a perfect tax system?
Well, it certainly isn’t fair right now. Sales taxes are regressive, because they punish those who can afford them the least. Why do you think that over 40% of SF school kids are on FREE and reduced lunches? Because so many working families in SF are doing so well? SD has over 13,000 millionaires, 4.3% of the population. Imagine if they were paying a 11.60% of their income towards taxes? That’s 1.5 Billion Dollars compared to the $299 million they are paying now. We wonder why we can’t fund education, roads and state government, maybe we should start taxing people fairly.
Unfortunately no system of taxation is perfect. You could also show similar charts that show the percentage people pay for housing or food or clothing or medical care or gasoline and you would find it is also a higher percentage for lower income earners than it is for upper income earners, because most things in life are based upon fixed costs rather than tiered rates.
The debate comes in when you attempt to define what is “fair”. Should the wealthy pay the same effective rate as the middle class and the lower income? If so, does that mean they benefit more from the roads and police officers and fire departments and public schools as do people of lesser means? Not really. So is it really “fair” to punish those who just happen to have more disposable income?
Keep in mind I’m not claiming I know the answer. However I don’t envision a system where Hy-Vee charges you based upon your income where a can of corn might only cost me $2 but it would cost T.Denny $425, and I’m sure most would agree such a system is silly. So why do we think of taxes in a different light?
Things will always be ‘unfair’ depending upon your interpretation. The fact our state does not have an income tax will always create a wider gap than states that do have income taxes, but I suspect there is also another factor at play here that pushes us above several other states that don’t have income taxes. That is the fact we are home to a large number of reservations where the average income is far below the poverty level.
I’m sure you already know that out of the 11 poorest counties in the entire nation, we are home to 6 of them including 4 of the top 5.
http://en.wikipedia.org/wiki/List_of_lowest-income_counties_in_the_United_States
We’re number one in something! (And number two, number four, and number five)
Therefore, these ultra-low income residents skew our tax numbers quite a bit, because as a percentage of their income, the sales tax is significant. Add in fuel taxes and property taxes and you can quickly see how the numbers work against someone who is near the bottom of income earners. For someone who makes less than $10k a year, every penny is significant, and it doesn’t help that alcohol and cigarettes are taxed at a higher rate***.
***Hoping everyone agrees and understands that it is well documented and known that those of the lowest income are more likely to drink and smoke and the percentage of income diverted to these items is exponentially higher than it is with middle and upper class income earners. Sad fact… but true fact.
So the solution is what exactly? Tax the wealthy more? Tax the poor less? Both of the above? I think you will soon find that no matter what we do, inequality will remain. There is no miracle cure here, and if you really want to get technical you will find when federal taxes are added in these very same low income people actually get back more money than they pay in which offsets some of the burden from the state.
Wikipedia? Does anyone remember when Reagan quoted the Readers Digest as a source?
Greg – I have often believed that the state needs to make changes to the tax system.
My proposal would be simple;
• Eliminate Video Lottery
• Eliminate sales taxes on food and clothing
• Tax EVERYTHING else at the same 4% rate (like RV’s, boats, cars etc.)
• Implement a state income tax on families making over $250,000 a year.
DL, don’t forget a corporate income tax too. The bank franchise tax is nothing but an corporate income tax on banks. This tax did not stop the growth of one of the biggest industries in SD over the past 30 years, so why not tax the other corporations as well. It did not stop Citi from coming to SD, nor Sears, Bank of New York, or Wells Fargo.
Craig – the issues isn’t equality – it’s equitability.
DLewis – you know there are far more retail sales exempt from sales taxes in SD than those that it is charged on – right? If everything sold to an end user were taxed – the sales tax rate could actually be cut from 4% to 2%, and property taxes and VL could be eliminated and we’d have the same budget numbers.
I have a good hunch that you can look to the rural wealthy for the source of the regressive tax. The greatest amount of wealth in this state is in our countryside and they are the most subsidized.
Nice reporting… A report I did not see in any of our locals.
LJL – You won’t see the media covering this, because to them, the rich walk on fricken water.
Ruf – I have heard that before. Also, the social costs of VL, IMO, far outweighs what we take in on it. I think eliminating VL would actually save the state money.
@Winston – yes wikipedia. The neat thing about them is they actually list the original source. In this case the actual data came from: Statistics derived from U.S. Census Bureau data; U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business; and DataQuick Information Systems, a public records database company located in La Jolla, San Diego, CA.
Neat huh?
@ L3wis – why the hatred towards video lottery? Shouldn’t people have the right to gamble if they so choose? Even if you eliminate it people will still gamble but instead of the state collecting taxes from it, the money will be diverted to the tribes or to the operator of a gambling website.
As to the proposal to eliminate sales taxes on food and clothing while taxing everything else at the same rate, it might work but I’d need to see numbers to see how feasible it is. People generally aren’t fond of paying taxes on healthcare either, so when you take food, clothing, and medicine away… you are slashing a huge piece of the pie. Not sure the numbers would work at 4% and I’d be afraid we would soon be paying 9 or 10% sales tax on the remaining items. Interesting idea though and perhaps if only items below $100 were exempt it would be more feasible (because for some reason I can’t support elimination of tax on a $280 pair of Armani jeans or a $450 pair of Jimmy Choos just because they are considered “clothing”).
The income tax on people making over $250k is interesting, but at what rate? We need to keep in mind that if we wish to start taxing the wealthy or taxing corporations it will have an effect on our ability to attract businesses here. I hate even typing those words because it sounds like a talking point from John Thune (aka: Job Creators), but it is a sad reality. Companies come here because of our tax benefits – it surely isn’t because of the weather, culture, or scenery.
Executives would be less willing to relocate here if the taxes were nearly as high as they would be in Florida, Texas, or Arizona, and if you can’t get the executives, you can’t get the companies.
Good discussion though.
Here’s some good dialogue on the topic:
http://www.sdbudgetandpolicyproject.org/south-dakota-ranks-3rd-most-regressive-in-state-and-local-taxes
Craig, Why not quote original sources rather than primary sources?
I mean, “rather than secondary sources?”
Winston – are you a primary source?
Rufusx, If I have personally experienced it I am. Otherwise it is my opinion.
Because a nice clean table is easier to understand than page 437 of a PDF which is then compared against cell G56 of an Excel spreadsheet.
Talk about missing the point.
Ah, I see. So anyone who has ever paid a tax on anything is an expert on tax policy. Got it.
Nope. But I find it a little disconcerting that someone who is homeless in SD pays a higher tax rate on their income then a millionaire. I’m just saying.
A tax policy, but not tax policy per se.