Thursday, January 15, 2015

Is South Dakota Headed For A Civil War?

What We City Slickers Think
(cartoon from
    Mmm, most likely not.  But given the standoff emerging between Governor Daugaard and State Senator Mike Vehle (R-District 20) over how (and by how much) to fund South Dakota's suddenly discovered major highway repair job, there sure seem to be some classically contentious elements, mainly rural vs. urban interests, emerging from the argument. Daugaard wants to raise $50 million by spreading the cost throughout the state via increased gasoline taxes, license fees and other sources.  Vehle wants to come up with $100 million (calling Daugaard's plan "too frugal") by adding fuel and vehicle assessments directed mainly at agricultural producers.
     As you might expect, ag interests aren't particularly pleased about this. But then, farmers in this state have been getting a sweet deal when it comes to taxes for a good long while, probably since the inception of the state. The South Dakota Department of Revenue in 2013 came up with a list of sales tax exemptions by industry that totals nearly $600 million a year.  More than a third of that, $221 million, is given up by the state to ag industry interests.  That these exemptions are probably so politically and historically entrenched as to make them sacrosanct is well known.  I'm sure that the reason farmers will be fighting hard against Vehle's proposal is that it could be seen as a first blow against a tax structure that has favored them for many years.  
     For their part, farmers can make a pretty good case that these tax breaks are needed by an

Farmers Get It
(cartoon from   

industry that goes through wild price swings that few urbanites can understand. I'm generally sympathetic, but I've argued here before that given the risk management tools and outright subsidies that are widely available and used by ag producers, a thorough analysis of the tax breaks that farmers in South Dakota get is way overdue.  That goes for every one of the special interest business groups that get sales tax exclusions, of course, so farmers shouldn't feel like the Lone Rangers in this drama.  I'm confident that we urbanites will discover that many of these breaks are justified, if only because we're fundamentally ignorant about what it takes to put food on our tables.  I certainly fed enough cattle during my commodity brokerage days to know that to be a fact.
     Meantime, if there actually is an incipient rural vs. urban face-off developing, this might be a good time to open up some dialogue.  That confrontation has characterized the civil wars among English-speaking folk for centuries (read Historian Kevin Phillips' "The Cousins Wars" for a thorough and copiously documented tome about that), so it comes as no surprise that equitably paying for our desperately needed road repairs will set up some squabbling in South Dakota.  We'll stop short of shooting, of course, but the hard feelings that are likely to erupt could last a lot longer than necessary.  

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