Tuesday, September 12, 2017

SD Senator Thune Sticks It To Consumers

     Our Senator John Thune said in the Rapid City Journal yesterday (9/11) that his "biggest priority for the remainder of the year" is tax reform.  Thune wants to send the president a
Sticking It To Consumers
package that will help "middle class South Dakotans who are struggling to make ends meet."  

     That's a nice enough sentiment, but while Thune's heart is in the right place, I'm not sure his head is following suit.  In fact, Thune kept his bias against middle-class consumers out of his RCJ piece.  In his website, he was recently praising the general thrust of his trickle-down tax reform philosophy by saying we "need to move our tax system more toward taxing consumption rather than savings and investment."  
     He then reveals a lack of interest or attention to his home state's constant struggle with that very tax policy by stating that "South Dakota is, of course, a great example of how to do this at the state level."  Yes.  "Of course."  Thune's infatuation with our state's regressive tax structure is so complete that he now wants to inflict it on the rest of the country.  Does the Senator understand that our reliance on sales taxes has led to a regular budget re-set derby among state government officials who've had to change projections twice during the past three years because sales tax receipts fell significantly short of expectations?  This is what happens in a state where consumption (sales and gross receipts) taxes are the dominant source of revenues.  South Dakota in 2015 got 82.4% of its state revenues from sales taxes, compared to a national average of 23.3%.  And Thune calls South Dakota a "great example" of efficient taxation?  Please.
     Meantime, when it comes to championing the economic interests of South Dakota's mid- to lower-income residents, Thune's proposal to focus on tax relief for savings and investments means virtually squat.  In his RCJ piece, the senator notes that half the public lives paycheck to paycheck and that a third are $400 bucks away from a serious financial crisis.  I doubt South Dakotans who fit that profile are cheering Thune's notion that a tax break for those who save and invest will make them better off.  In his website's trickle-down polemic, Thune claims that Reagan-era tax cuts were responsible for the economy's bounce-back during the 1980s, completely ignoring that federal spending increased by 2.5% a year from 1981-1989.  The federal debt during that era went from $997 billion to $2.85 trillion. Those who know something about John Maynard Keynes and his theories about government spending driving economic growth are sagely nodding their heads. We also wonder why trickle-down proponents never mention Reagan's ballooning deficits. 
     I cheer the prospects for Thune's style of tax-cutting as lustily as any of my peers in the business community, but I also know that without consumers my business interests wouldn't amount to much.  Consumer spending represents more than 70% of the American economy. Giving us business types some tax relief is indeed likely to drive more investment and capital spending, but to do so by "moving our tax system more toward taxing consumption rather than savings and investment" makes no sense.  Thune needs to focus on those who spend, not on those who save.  


  1. "Thune needs to focus on those who spend, not on those who save." Amen. All politicians and CEOs do. When most of the jobs are gone overseas, or handled by technology, and yet all the taxes are paid by the middle and working classes (God forbid corporations and wealthy pay taxes!), who do they think is going to buy what's produced? You can't buy anything if you don't have an income...

  2. It's ironic, that the state of South Dakota gave itself a 12 1/2% increase in sales taxation ability, a couple of legislative sessions ago, but now is still short of funds. The City of Sioux Falls, with the fastest growing economy in the state, is cutting the budget by 5% even though they suck 2 cents on every dollar spent including groceries, for everyday things and three cents of every dollar for entertainment, including eating out. They attempted to bribe the legislators into another penny of city sales tax the session before last and nearly got the job done, before the bill failed on the senate floor.

    I have said it many times before, so not sure if I said it here. When I started in the workforce full-time in 1960, I was earning about 5,500 a year and was very well paid. The CEO was earning 25k. When I retired 45 years later I earned 32k while the CEO was paid 155 million. The top tax rate in 1960 was 91%. When I retired, I believe it was about 37%. But that doesn't tell the full story since most executive positions are paid in stock options which when exercised are taxed as capital gains at either 15 or 20%.

  3. John: I am wondering if you might have more success than I have had, in finding out where the step up in basis for decedents estates might fit in (or out) of the Republican efforts to repeal the Estate Tax. I have this concern that the repeal benefitting the .2% might generate a serious income tax issue for the 99.8%. I wrote to all three members of our congressional delegation two weeks ago, and haven't heard from any of them since.

  4. John: I wonder if you might have more luck than I have had in getting answers from our congressional delegation on the future of the step up in basis for a decedents estate, if the repeal of the estate tax becomes a reality. It seems that without the assurance that the step up in basis will continue for the beneficiaries of an estate, the .2% that will benefit from the repeal could generate come pretty serious income tax issues for the 99.8% I wrote to all members of our delegation about 2 weeks ago, but haven't heard from any of them.