Two Democrat-backed bills reforming the sales tax went down to successive defeat Thursday morning.
Rep. Marc Feinstein, D-Sioux Falls, pushed House Bill 1154, which would lower the state’s sales tax on food and raise it slightly on everything else, in a roughly revenue-neutral fashion.
He pitched it as a matter of fairness — that a sales tax on food hurts the poor disproportionately — and pointed out that many states exempt food.
Countering that argument was the idea that exempting food would make the state’s revenue stream unstable.
The greatest strength of the food tax is also its greatest weakness. Even in hard times, everyone has to buy food — it’s what economists refer to as a product for which the demand is “inelastic.” You can stop buying luxuries, but you have to buy food.
For opponents of food tax, this is exactly why the tax should be abolished — because the poor spend a disproportionately large portion of their money on food and other staples, it hits people with the least the hardest.
For supporters, it’s why it should be kept. Because demand for food is inelastic, it provides a very stable revenue stream, as opposed to other products where tax revenue goes up or down with the economy.
But Feinstein’s arguments — and those of retired economics professor Rep. Ray Ring — didn’t carry the day. On a party-line vote, HB 1154 was defeated 10-4.
Rep. Susan Wismer, D-Britton, was up next with a bill increasing the state’s sales tax from 4 percent to 5 percent.
Wismer knew her bill wasn’t going anywhere — “I’m going to do a little tilting at windmills today” she said by way of introduction — but gave an impassioned speech, a liberal cri de coeur, in favor of increasing South Dakota’s tax revenue. The speech had Rep. Bernie Hunhoff gushing, but to no avail. The House Taxation Committee defeated her House Bill 1193 12-3. She didn’t even get full Democratic support — Feinstein voted no because he didn’t want to raise the sales tax if it still taxed food.