One of the most controversial initiatives on the ballot for South Dakotans on November 5th is Initiative Measure 28, which deals with sales taxes on consumers. According to several business and community leaders, the measure is confusing and will lead to a state income tax in South Dakota.
IM28 as it’s otherwise known, will prohibit the State “from collecting sales or use tax on anything sold for human consumption.” The Attorney General states that human consumption is not defined by state law. The lack of a definition makes estimating the budget impacts nearly impossible. That’s enough for many leaders to oppose the flawed initiative altogether.
Rapid City and Statewide Reactions
One of those leaders is Mayor Jason Salamun of Rapid City. Salamun believes the lack of clarity in the language of IM-28 is a primary reason to oppose the measure. “The definition of consumables is unclear,” he said. “It creates a mess we will likely have to clean up for quite some time.”
Nathan Sanderson, Executive Director of the South Dakota Retailers Association, one of the largest associations in the region agrees and believes IM28 goes too far. “IM28 would eliminate the state’s ability to tax anything sold for human consumption,” said Sanderson. “This includes everything from tobacco to food to paper products and much more, resulting in a loss of up to $646 million per year, according to the Legislative Research Council.”
Proponents have sold IM28 as a way to give tax relief to working families who are unfairly taxed on groceries, but Salamun points out this line of thinking doesn’t really capture the full picture. “While tax relief is welcomed, why would residents remove a sales tax that we share with millions of visitors each year? This measure not only impacts the state, it also handcuffs municipalities who provide essential services to our citizens.”
The Economic Development Perspective
Typically, lower taxes are considered a good thing from an economic development perspective. Businesses expand and grow when there are less regulations and less red tape. But that’s not what’s really going on with IM28, according to Mike Bockerny, CEO of the South Dakota Economic Development Professionals Association. “It’s the exact opposite,” he said. “This abstruseness will lead to unintended consequences for retailers, who will find themselves traversing a convoluted panorama of tax regulations that will vary significantly from one item to another. The lack of clarity over what should and should not be taxed will create a cumbersome administrative burden, predominantly for small businesses already functioning on tight margins.”
IM28 has been hotly debated for several months leading up the election. It is opposed by a multitude of groups across the state including chambers of commerce, the SD Association of Cooperatives, and the SD Bankers Association. Although polling has been sparse, a recent poll by KELOLAND News indicates that IM28 would likely fail.
