February 26, 2016

Resources to Increase Teacher Compensation/Address Public Workforce Shortage - One Step Closer

HB 1182 – Approved by Senate Appropriations Committee

The private sector has been dealing with workforce shortages for many years.  Long enough to grasp one fact – this problem cannot be solved by taking a pill.  In fact, the issue of labor shortages for many industries is maddening because it defies any single solution.

One solution does appear to be common among private sector employers and that solution is increasing compensation.  For the public sector there is a kick, significant resources usually require an increase in a fee or a tax.  Such is the case with teacher pay and the increase would be a half-cent hike in the sales tax.  The Chamber is supporting this increase because having an educated workforce with skills such as critical thinking, is essential to the success of the economy and a service that is overwhelmingly provided by the public sector.  It makes sense and it is time.

New Argument – The last issue of Capitol-ism reviewed some of the arguments being used against HB 1182 and mostly discussed how legislators in charge of appropriations say there is not enough revenue in the budget to address teacher pay.  A new argument has surfaced in the hallways and was expressed in committee. 

“Why are we increasing one tax to decrease another tax?”  Answer:  “We’re not.”

This argument makes reference to the use of about one-third of the revenue from HB 1182 for property tax reduction.  The sales tax isn’t being increased to reduce property taxes.  A smaller tax increase of ¼ of a cent would not raise enough revenue for teacher compensation but ½ cent raised more than is needed. 

The Governor is seeking enough revenue to meet the challenge but is not seeking to use the excess money for new programs or spending it because it is there.  Not that a trip to Disneyland for selected taxpayers wouldn’t be memorable, it’s just that it would be far better to put the excess cash to work for all taxpayers and a property tax reduction is the most efficient way to accomplish that goal.  Plus, the mechanics of reducing property taxes with the revenue are embedded in the school funding process so arguably all of the funds are being used for education.  

HB 1182 had a hearing before the Senate Appropriations Committee and was approved by the committee on a vote of 7 to 2.  It now goes to the full Senate for a vote sometime next week.  Here is the vote in committee:

HB 1182, Senate Committee on Appropriations, Do Pass

Please Contact Senators Now!  The next step for HB 1182 is a vote on the Senate floor.  Because this is a tax increase, it will take a 2/3rds vote which is 24 of the 35 member of the Senate.  Here is a list of members of the Senate and their email addresses, The Chamber urges members to contact their district Senators sometime in the next few days and urge a YES vote on HB 1182.

Senator James Bradford - sen.bradford@state.sd.us

Business Voice Needed – Senators have heard from teachers and education groups.  The fact that many local chambers of commerce, the South Dakota Retailers Association and the South Dakota Chamber of Commerce are supporting HB 1182, and the other reforms, is very unique and the voice of otherwise “tax crabby” coalitions is very influential, if made known.

The Chamber has made their support public by having members wear the button below as a sign of support . . . albeit a rather quirky one:

Speaking of tax collections – Who collects the sales/use tax anyway?

Everyone is used to seeing the sales tax at the bottom of a receipt when buying things in a retail store or paying for a meal at a restaurant.  It would be easy to conclude that these places must collect the vast majority of the money from sales taxes.  They aren’t.

Below you will find a chart of the taxable sales (including use tax) presented by SIC code.  As proof that South Dakota’s sales tax is assessed on an extremely broad base of personal property and services, this list shows that traditional retail stores (which include restaurants) collect about 51% of the sales/use tax revenue from their customers.  The other half comes from service providers such as lawyers, accountants and consultants, auto repair shops and sheep shearers.  As further proof that all people are in need of redemption in some regard, if you are in business in South Dakota, you are a tax collector.

Here is the list of taxable sales (including use tax):

For a complete list of bills tracked by the South Dakota Chamber, please click here.