The start of week three, or…taxes, taxes, taxes

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Legislators have three-and-a-half weeks after the start of Session to introduce bills.  While there were 82 bills pre-filed by the first day of Session, there have been only 30 additional bills added to the hopper in the two weeks since then.  That doesn’t mean, however, that legislators haven’t been busy.  Many are circulating various pieces of draft legislation, looking for feedback on their ideas and soliciting co-sponsors.  We can expect this next week to bring a flurry of bills to add to the list of things we are monitoring.

On Wednesday, legislators are scheduled to meet in a joint session to hear Governor Noem’s budget proposal.  The latest monthly budget reports indicate that the amount of projected revenue will be very close to what Governor Daugaard suggested in his budget address in early December.  At that time, he did not include any additional revenue the state would receive from online sales taxes.  The next monthly revenue report, scheduled to be posted in early February, should reflect some of those online sales.  In her State of the State Address, Governor Noem called for continued fiscal discipline in the state budget.  The Wednesday address will show how she intends to work toward that goal.

According to the Department of Revenue, South Dakota has the fifth lowest per-capita tax burden among the 50 states and the District of Columbia.  Our per-capita tax burden is $2,103 per year.  The lowest is Alaska at $1,608, and the highest is the District of Columbia at $11,028.

The largest source of funds for state government is our 4.5% sales and use tax, which generates slightly over $1 billion for the state’s general fund.  The next three top sources of revenue are video lottery, the contractor’s excise tax, and the insurance company tax.  In all, the general fund accounts for almost a third of the state budget.  Federal funds provide slightly over a third of the state budget; the remaining source of funding comes from licenses, permits, and fees associated with particular activities.

There are two additional areas which may be of interest to South Dakota taxpayers – motor fuel taxes and property taxes.

Motor fuel taxes and motor vehicle excise taxes go the state highway fund to pay for roads and bridges across the state.  The annual motor vehicle registration fees are used by counties to pay for local roads and bridges.

Property taxes do not go to fund state government, but are used to fund local K-12 schools, counties, and municipalities.  Last year, South Dakota property owners paid more than $1 billion in property taxes, with over half going to fund local schools.  In addition, the state adds over $500 million to pay for local schools, making education the largest single expenditure for the state’s taxpayers.

A statistical breakdown of the taxes paid and where the money goes is available on the Department of Revenue’s website at http://dor.sd.gov.

2019 Session finishes its first week

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The first week of any legislative session is fairly predictable.  Legislators start getting settled into their new routines, committees are organized, state agencies begin presenting their budget requests, and we start learning about potential legislative proposals that will be introduced.

We also have three prescribed addresses the first week of session:  the State of the State, the State of the Judiciary, and the State of the Tribes.

Governor Noem’s State of the State address highlighted several areas where she intends to build on efforts from the Daugaard administration.  These include continued fiscal discipline and maintaining a pro-business climate, workforce development, and government transparency.  Specific projects mentioned during the speech included:

  • Access to broadband service in all areas of the state
  • Wildlife habitat and reinstating a bounty program for predators
  • Transferring the Ag Development division from the Department of Agriculture to the Governor’s Office of Economic Development
  • Affordable housing
  • Requiring high school students to pass a U.S. Citizenship exam
  • Foster care
  • Support for the Keystone XL pipeline

Chief Justice David Gilbertson highlighted the success of South Dakota’s Rural Attorney program, drug and alcohol courts, mental health evaluations, and improvements at the Law School in Vermillion.  He also talked about the increase in litigation involving trust assets.  South Dakota leads the nation in trusts, with $3.2 trillion invested in the state.

Rosebud Sioux Tribe President Rodney Bordeaux expressed his desire to work with the Noem Administration in areas such as education, mental health services, substance abuse, health care, and economic development.

As various state agencies and offices begin presenting their budget requests to the Appropriations Committee, they are using the numbers from Governor Daugaard’s budget proposal in December.  The committee anticipates Governor Noem will provide an updated budget recommendation within the next week or so. One area we will be watching is the amount of revenue from online sales taxes.  When the state has collected $20 million from online merchants, the 4.5% sales tax rate will need to be lowered.

You can find comprehensive legislative information online at: sdlegislature.gov.

Please feel free to contact me throughout the legislative session at any time via email at Mary.Duvall@sdlegislature.gov.  I welcome your questions and comments on these and other issues facing the state.