Good morning District 27. Yesterday I came across the minutes from the City of Martin Council Meeting published in the August 28th Edition of the Bennett County Booster. I see the Finance Officer has taken it upon herself to educate our City Council members on the effects that Initiated Measure 28 will have on the potential revenue loss if the voters approve Initiated Measure 28. (See screenshot of posted minutes from City Council meeting.)
For those who may not know, Initiated Measure 28 (IM-28) is on the ballot for the November 5th General Election for voters to approve since the legislator refused to listen to the people of South Dakota during the 98th Legislative Session. IM-28 is the repeal of the 4.2% state sales tax on anything sold for human consumption, except alcoholic beverages and prepared food. Moreover, the initiated measure states that “municipalities may continue to impose such taxes.” Therefore, the City of Martin’s Finance Officer has misinterpreted the text of Initiated Measure 28. See the screenshot of the approved IM-28 and read it for yourself. There is nothing that states that local municipalities cannot collect the 2% sales tax on food. However, municipalities are crying foul all across the state and are arguing that this will impact their revenue streams and are passing resolutions to encourage voters to vote against IM-28 (See attached City of Martin resolution printed in last week's Booster.)
Here is the truth about IM-28. Back in the 8th grade, my government teacher Mr. Miller informed his class that the sales tax is a regressive tax and an unfair tax where lower-income families and the working class pay a disproportionately higher percentage of tax than the upper 1% of the income earners. This is a fact and indisputable.
According to a report by the Institute on Taxation and Economic Policy, “the poorest 20% of South Dakotans, or those who earn around $20,000 or less, pay 11.3% of their income in taxes each year. The wealthiest 1% of South Dakotans pay 1.8% of their income in taxes. The institute lists South Dakota as the fourth most tax-regressive state in the country” (1). Think about that for a second. A widow or a single parent on a fixed income and barely making ends meet has to pay a higher percentage of her income on sales tax for groceries than a person making a six-digit salary. Not only is this not fair, but morally unjust because everybody has to eat to survive. “Feeding South Dakota reports that 106,000 of our fellow citizens, including 1 in 6 children, are food insecure. They don’t know where their next meal is coming from” (2).
According to a South Dakota News Watch article published June 7, 2021, “South Dakota is one of three states that still taxes groceries at the full state sales tax rate, according to the Center on Budget and Policy Priorities. Sixteen other states tax groceries, but at a lower rate than the general sales tax. Sales taxes in South Dakota generate more than $1 billion annually and provide about 60% of the state’s general fund revenues. Individual municipal sales tax rates are added onto the state 4.5% rate” (1). Note, since the publication of this article, the State of South Dakota sales tax rate on consumable items is 4.2% since the enactment of HB 1137 into law in the 2023 Legislative Session, which puts the sales tax on groceries within municipalities at 6.2% (4.2% + 2% = 6.2% total). However, during negotiations with the Senate, a sunset clause was added to have the tax cut expire in 2027 (3). Thereby, the state sales tax would revert to 4.5% in four years - a nice consolation prize to the taxpayers, but not a permanent tax cut.
“The regressive nature of South Dakota’s sales tax, where all consumers’ rich or poor pay the same tax rate on goods and services, including food, is in part preventing the state’s lowest earners from reaching financial stability” (1). Moreover, low-income earners have to make tough food choices when it comes to purchasing grocery items that impact overall health and well-being. In this current economy, consumers ask themselves, “Do I buy that head of lettuce and bag of carrots, or do I buy the bananas and the gallon of milk for my kids?” This becomes even more critical when small-town communities such as those in District 27 are in a food desert and do not have a fresh choice of fruits and vegetables at their disposal all year round, making it even a greater challenge to provide nutritious food for young families.
The South Dakota Municipal League claims small municipalities could lose between 25 and 40% of their sales tax collections. The Municipal League refers to state law that allows cities to impose a sales tax on the same items taxed by the state (4). The Municipal League’s claim is based on 2023 revenue projections, which as everyone knows, fluctuates with the economy. Moreover, any good accountant can manipulate numbers to get a good reaction from his client. However, the fact is that the Initiated Measure 28 says no such thing. It clearly states, “Municipalities may continue to impose such taxes.”
At the end of the day, I plan to vote with the vast majority of hard-working families in South Dakota by voting “YES” on Initiated Measure 28. I am pro-family and this initiated measure aligns with supporting family values. The latest poll (May 2024) shows that 66.4% of South Dakotans plan to vote YES to repeal the sales tax on groceries (3). It is time that the people have more of their hard-earned money in their pockets rather than the state which oftentimes has bloated its budget because of the surplus in revenue that it has extorted from the taxpayers.
In closing, the bloated budget at the local level reminds me of when I attended the City Council Meeting in Martin on July 10, 2024, when the Independent CPA Auditor from Casey Peterson mentioned the City was sitting on over $400,000 of the taxpayers' money (Reference time stamp 16:15 of YouTube video link https://www.youtube.com/watch?v=Dwbrv5Vq76Y), yet, the City Finance Director says that with the repeal of the grocery tax, the City of Martin will lose tax revenue and have a hole in its 2025 budget. Here is a unique concept: How about giving that surplus the city earned in the form of a tax break so I can stimulate the local economy and/or have more money to tithe to my local parish community? Better yet, that money could have been set aside for infrastructure such as needed sidewalks for our community. It’s high time that City Council members think outside of the box. Perhaps it needs to rein in spending from the BBB account on frivolous activities that do not generate revenue for the city and re-evaluate its liquor license and tipping fee structure at the landfill for starters or alternately look into a consumption tax. Think about it: Would you prefer to put your hard-earned money (in the form of a tax cut) into your savings, CD, or 401K account to accrue a higher rate of interest, or would you prefer to lend the State of South Dakota an interest-free loan (e.g., revenue from sales tax on groceries) and have it put into their “bank account” collecting interest while you continue to pay into their state coffers? I think I know which option I prefer. Vote “YES” on IM-28 this November. God bless.
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