Editorial

Editorial by the Plain Talk We�ve talked about this before.

But this topic deserves additional discussion, especially with the November election sneaking up on us so fast.

Besides a slate full of national, state and local candidates, South Dakota voters will be asked whether or not to keep the sales tax on food items.

Initiated Measure 1, if approved, would remove that tax. There are people of all political persuasions, Democratic, Republican, Independent, who have voiced support for the idea.

They circulated petitions to refer the measure to a public vote.

And they�ve been highly critical of not only the food tax, but efforts made by the South Dakota Legislature to ease the burden the tax imposes on low income state residents.

We have just one bit of advice to offer to local citizens who are subjected to a pitch to repeal the food tax: Don�t fall for it.

Why? Well, it�s incredibly easy to lure people to your side with promises of allowing them to keep a bit more money in their wallets each time they make a trip to the grocery store.

Like passengers on a parade float throwing candy to children, we suspect that some people who support the repeal are largely trying to curry political favor, damn the consequences.

It�s those consequences that we need to focus on.

Repeal the sales tax on food, and you take away about $41 million from the state � that�s about 9 percent of the state�s sales tax collections.

Municipalities will lose $19.7 million � approximately 11 percent of municipal sales tax collections.

The four Native American tribes that contract with the state to collect sales taxes on their reservations will lose $800,000 � a whopping 30 percent of their sales tax collections.

No doubt we�ll be hearing plenty of talk from supporters of the repeal who, remarkably, act like this is no big deal. Don�t fall for that act. It IS a big deal.

They say that the state can grow out of the revenue loss. They don�t point out that from fiscal year (FY) 1999 to FY 2002, there has been only one instance when general fund growth exceeded the estimated $41 million that would be lost without the sales tax on food.

In FY 1999 to FY 2000, the general fund grew by $63.4 million or 6.79 percent.

In FY 2000 to FY 2001, the general fund grew by $33.5 million.

But in FY 2001 to FY 2002, the general fund grew by a paltry $6.5 million.

It appears we would constantly need to have a booming economy in South Dakota to make up the loss in sales tax revenue through growth in the general fund. And, as anyone who has lived for even a short time in South Dakota knows, that�s just not going to happen.

This neatly dovetails with our next point of discussion. Proponents of the tax will no doubt argue that the state should simply tap into its reserve funds to make up for any loss in revenue.

Well, let�s see. South Dakota has about $110 million in a property tax reduction fund to make sure education receives full funding. We suppose we could spend that, but our property taxes would have to go up to supply funds for state aid to education.

We have nearly $370 million in an education enhancement trust fund, which we can�t touch, thanks to a Constitutional amendment we approved in 2001.

There�s about $90 million in a health care trust fund. Oops, can�t touch that because of another Constitutional amendment approved by voters in 2001.

There�s about $260 million in the Dakota Cement Trust. You guessed it. We can�t touch it, Constitutional amendment, 2001.

That leaves us with �a rainy day fund,� which, earlier this year, contained about $40 million. In other words, we would spend it all the first year, and still be $1 million short.

It�s likely that fund may not be at $40 million anymore. State government ended its fiscal year on June 30 by transferring $14.8 million from the reserve to balance the budget.

In other words, we need that reserve fund now.

As for the sales tax repeal? Don�t fall for it.

The Vermillion Plain Talk editorials reflect the opinion of Plain Talk editor David Lias. You may contact him at david.lias@plaintalk.net

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