I see that Sioux Falls Democratic state rep Marc Feinstein's annual effort at eliminating the state sales tax on food went down the tubes again at this year's legislative session. Seems like its biggest obstacle is concern in our Republican-dominated legislature that the proposal doesn't include a guaranteed way of replacing those taxes, thereby making the plan revenue-neutral. Feinstein's plan would have raised sales taxes by an equal amount on non-edible purchases, but that didn't pass muster. Apparently there was no evidence showing that the replacement sales tax would make up for the revenue losses incurred by eliminating the tax on food. So for now, South Dakota will remain one of a handful of states with this most regressive of all taxes, regressive because it takes a bigger share of a poor person's income than a rich person's. Why? Because the poor spend more proportionally on food than the rich. Some, me included, call this unfair.
But forgetting about the fairness/unfairness component of it for a moment, let's consider its repudiation of core Republican taxation philosophy. As a lifelong Republican myself, I've always believed wholeheartedly in the traditional GOP notion that cutting taxes ultimately leads to more tax revenues for the government. Why? The general principle is that setting money loose into the private sector is a much more efficient way of getting that money to grow the economy than by gobbling it up as taxes. Though this is standard Republican economic fare, even Democratic icon JFK enunciated it when he cut taxes way back in the early 1960s. Similar measures in the early 1980s and early 2000s occurred, all of them with a stimulative effect on the economy. Though not directly related to sales taxes, the well-known "Laffer Curve" (created by University of Southern California Economist Arthur Laffer back in the 1970s) showing the connection between tax rates and tax revenues is often used to support the general notion that taxes can have a detrimental effect on tax revenues if imposed beyond certain levels. John F. Kennedy, speaking of his proposed tax cuts in 1962 said, "the soundest way to raise (tax) revenues in the long run is to cut the rates now."
Based on real-life experience and academic support, the idea of lower taxes leading to more government revenues is one that I've always supported, and the same goes for the leadership of my party. As I also subscribe to the simple notion that all taxes are income taxes, I believe the principle applies to sales taxes. This leads me to wonder why the principle isn't applied to eliminating sales taxes on food. By doing so, it puts more cash into the hands of our economy's most energetic component--consumers. What's particularly puzzling is why the Republicans who dominate South Dakota's state leadership don't see it the same way, consistent as it is with their party's central economic principle. We always brag about South Dakota being a low tax state as a means of enticing investment into it, but never seem to apply that pitch to the ordinary Joes and Janes who might be likely to move here only to find out that they're stuck with taxes on their food, unlike most of the states that they'd consider moving to in the rest of the country.
I think we need to get our story straight when it comes touting our tax burden. No personal and corporate income taxes make for a good story--but when it comes to telling potential investors that their employees will have to pay a greater share of their incomes on food than their bosses, we seem to clam up. Not a good thing, actually. Somebody with some clout should look into this.