Between the Lines

Between the Lines by David Lias Is there irony in the fact that the surgeon general is trying to get Americans to eat less and exercise more at about the same time South Dakota Democrats are pushing the idea of taking the sales tax off food? Malnourishment doesn't seem to be a societal problem right now. Do we want to make it even easier to get calories?

I'm not serious, of course. Equating a tax on groceries with health and nutrition is a ridiculous stretch when put in those terms. Unfortunately, however, it is an argument being used by many South Dakotans who are in favor of removing this tax.

It's time for them to shift focus.

The poor should not be used as an excuse to lift this tax. People truly in need already qualify for food stamps and women-and-infant-children vouchers, which already are exempt from sales taxes in South Dakota.

No, this is a question that goes to the heart of the state's overall taxing philosophy; it is one that speaks to both fairness and South Dakota's revenue needs.

It's rather ironic that this week District 17 Rep. B.J. Nesselhuf, a Democrat from Vermillion, is complaining that the sales tax on food recently increased slightly in communities that already had the tax, and was implemented in communities that didn't, thanks to SB 76.

This was all part of the sales tax streamlining process.

The streamlining, passed last year despite Nesselhuf voting against it, was implemented so that cities would have one tax rate effective Jan. 1, and would also tax the same items and services as every other city in South Dakota.

Currently, South Dakotans can make purchases over the Internet without paying a sales tax if the company they're doing business with on their home computers has no physical presence in the state.

Congress asked states to streamline their taxes so that if or when an Internet tax law goes into effect, there will be relative balance nationwide.

"First of all, I DO believe we should be fair to Main Street businesses and tax Internet sales, which is what SB 76 purports to do," Nesselhuf stated last year. "However, it takes an act of Congress to make merchants on the Web collect sales tax. In the meantime, SB 76 raises the tax on food in 139 South Dakota cities. I am unwilling to raise the tax on the very staple of life in the hopes that Congress will act."

So ? does that mean he's unwilling to tax food, but he doesn't care that Main Street merchants can do nothing but watch their customer base erode as more people shop on the Internet to avoid taxes?

You won't hear Nesselhuf talk about removing the sales tax on, oh, let's see, office supplies or car tires, or a pair of blue jeans.


Under normal circumstances, the sales tax is among the fairest of all taxes.

Consumers, rich and poor, are taxed equally according to their own purchasing decisions. If you don't want to pay, you don't have to buy, or you could shop at a bargain store rather than at a fancy, high-priced place.

No other tax has that voluntary element to it.

But when it comes to life's essentials, the sales tax becomes the most regressive tax of all. People can't live without food, and the less you earn, the greater the burden on your pocketbook.

It would be as if the NBA passed a rule that the basket had to be placed progressively higher for the shorter players.

Nesselhuf has been doing a lot of chest-thumping lately, casting himself in the role of protector of the poor's pocketbooks, making sure every hungry mouth gets bread to eat.

There's something that just doesn't quite add up here, though.

Gov. Mike Rounds says loss of the sales tax on food would cost the state $42 million in lost revenues and $18 million in lost funds to cities that charge a municipal sales tax on top of the state rate. Tribal governments would lose an estimated $1 million annually with a total repeal.

Nesselhuf naturally claims those figures aren't accurate. Not everything in a grocery store, he argues, is a food item. And that means the impact on state collections is actually less.

For the sake of this discussion, let's just pretend Rounds' figures are in the ballpark somewhere � a total of about $60 million lost to the state, cities and tribal governments.

How are we suppose to make up that shortfall?

It is likely that we'll be deciding whether to eliminate the sales tax on food in November. Petitions are being circulated to put the issue to a public vote.

I hope voters take the time to do their arithmetic before going to the polls.

All of these proposals, you see, raise a question I can't shake. It's assumed that South Dakota's traditional storefront businesses will lose money in the future to Internet retailers. At least, experts are predicting a steep rise in online sales over the coming years. As I see it, then, the idea behind an Internet sales tax is to recoup the money state and local governments would lose from this enormous shift in consumer preferences.

The state would, presumably, collect $1 for every $1 lost. So where would the extra money come from to make it possible to remove the tax from food?

A state income tax.

Of course, you won't hear Democrats talk much about that. They're following the course of a couple years ago, when the inheritance tax was brought to a vote.

Citizens killed the "death tax" creating a $25 million hole annually in the state budget. The people passing the petitions didn't care enough about their state to suggest a replacement revenue source.

Today, Democrats and some Republican lawmakers simply point to existing state reserves and the growth of the state economy. That, they say, will offset the loss of revenue brought in by the sales tax on food.

What they fail to discuss is how removal of this food tax � which frankly, is affordable to at least some of the general population � will severely weaken the state's tax base.

Gov. Rounds' proposal makes the most sense. He wants to remove the sales tax on food for those who would be affected the most � the poor. This would cost the state only about $5 million a year.

If what Nesselhuf and other legislators are doing is trying to force an income tax, they should say so.

If what they're doing is trying to reduce government, they should say whether they want Medicaid reduced or the children's health insurance program cut or state aid eliminated.

There's nothing bold about proposing a tax cut without at least trying offer a solution to South Dakotans that truly guarantees some semblance of fiscal security for years to come.

By not following through on this issue, Nesselhuf and lawmakers who think like him will raise a host of other fairness issues as they likely will be forced to raise every other tax to compensate.

Soon we'll all be more fit as we work harder to pay for it all, and the surgeon general will be happy.

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