Argus Leader (Sioux Falls, SD) Editorial - Keep tax: Lost funds will hurt programs

Argus Leader (Sioux Falls, SD)

February 15, 2004 Sunday

HEADLINE: Keep tax: Lost funds will hurt programs

BYLINE: Mike Rounds, Readers

BODY:
BY GOV. MIKE ROUNDS

Each year, the state collects almost $42 million from the sales tax on food. This money is used to fund education, medical services for the elderly, disabled and the very young, as well as other services for the citizens for South Dakota.

In addition, our cities and towns are now collecting more than $19 million each year, and our tribal governments receive nearly $1 million.

If we repeal the sales tax on food, our state will have to fill a $62 million hole in our budgets to fund ongoing expenses.

Proponents of the repeal say the $62 million hole can be filled through economic growth. Growing our state's economy is one of my goals as governor. However, we cannot reasonably expect the economy to grow at that rate. As the economy expands, revenue will increase, but so will ongoing expenses. Our budget reserves and property tax reduction fund will not last.

The state could freeze spending for several years or make painful cuts to help fill the hole. This year, almost 75 percent of the increases in our state's general fund budget went to education and medical services for the elderly, disabled and the very young.

Painful spending cuts would likely impact the same areas. This could lead to property-tax increases, school closings and sharp increases in health-related costs.

The Internet sales tax has been tabbed as a source of revenue to replace the sales tax on food. When, and if, it becomes available, South Dakota will potentially collect millions of dollars each year from the Internet sales tax. However, it is not known when this tax source will materialize. It would not be responsible to spend this money before we have it.

Some have proposed filling the $62 million hole with other tax increases. I have seen one proposal that would raise five different taxes to replace the revenue. A few years ago, the voters repealed the state inheritance tax. We still have a $19 million structural deficit in the state budget from that repeal.

I am concerned that the repeal of the sales tax on food could eventually lead to a state income tax. I know that I speak for the vast majority of South Dakotans when I say I do not want this to happen.

I have always said that state government should care for those who cannot care for themselves. As a result, I have proposed that South Dakota issue a refund for the sales tax on food to any person or family in this state whose yearly income is 150 percent of the federal poverty level or below. This proposal would target sales tax relief to the 65,000 families that need it the most. In addition, this approach would cost South Dakota, cities and tribes about $7.25 million per year, rather than the $62 million a complete repeal would cost.

If the repeal of the sales tax on food occurs, I will work with legislators to implement necessary reductions in education and health related services as painlessly as possible. But the $62 million price tag for our state, municipal and tribal governments is simply too high. I urge all South Dakotans to consider my proposal. Working together, we can give relief to the working poor while maintaining a responsible state budget.

Mike Rounds of Pierre, a former state senator, was elected governor of South Dakota in 2002, and he opposes repeal of the sales tax on food.