Are sales tax exemptions ever analyzed, item by item, in South Dakota? If not, they should be, because we've got 'em up up to our collective eyebrows in this state. I was reviewing a list of exemptions put out last year by the South Dakota Department of Revenue and couldn't believe how much potential revenue to the state is given up by this 15 page list of goods and services that are exempted from collecting the state's 4% sales tax. The amount, $582 million a year, is actually pretty staggering in its own right, but when you consider that total revenues raised by the state last year were about $2.4 billion (another $1.6 billion comes from D.C.), that figure represents a enormous chunk of potential income. Cory Heidelberger over at Madville Times notes that just 17% of it would create the $100 million it would take to bring South Dakota teacher salaries up to competitive snuff with those of our surrounding states. Just scan that list and see if there isn't a lot of potential to do just that.
The best comment in the entire document I linked comes from the DOR itself. It notes that "on a case by case basis, the estimates [of potential revenue] provide a valuable benchmark for discussion of whether policy justifications warrant the loss of revenue." Sounds to me like the tax collectors themselves see some room for lifting some of these exemptions. This is a list that must be reviewed--you'll see why when you get a load of some of the exemptions, too numerous to list here--and put under some scope of analysis by our elected officials, whose constant refrain when it comes to many budget requests is that there's not enough money to fund them.
Fair enough, but I think we could scare up some more revenues in this state by collecting sales taxes on goods and services whose exemptions may have made sense at one time, but are really outdated and unnecessary now. For example, South Dakota's ag sector accounts for about $220 million of exempted sales taxes, no doubt a tradition held over from the days when ma and pa farming and ranching was the norm and people in an industry with so much weather and price volatility needed some help from the state to get through the lean years. Those days are long since gone, as risk management techniques via crop insurance, subsidies and marketing strategies have led to an industry sector in South Dakota that is doing very well, collectively, and can afford to cough up 4% sales taxes on goods and services related to ag production.
Fact is, I believe the ag sector of this state is the envy of the business community at large, considering that just about every other business I can think of has to pay sales taxes on the most, if not all, the goods and services required for their operations. I know I do with mine, which I certainly don't begrudge, but do so wondering about the fairness of the overall schemata. There's no doubt that many of the exemptions listed by DOR have a reasonable basis, but everything considered, I go along with the State's tax collectors and think it's time to re-evaluate whether the "policy justifications warrant the loss of revenue" from some of these exemptions. Now that the legislative session is over, Governor Daugaard should consider creating a commission to do just that. We've got almost a year to go over this stuff before our elected officials come back into session. A good explanation as to the justification for every one of these exemptions needs to be forthcoming.