Home > 2015 SD Legislative Session > How does a SD legislature try to sell a massive tax increase? By focusing on the difference between taxes and fees!

How does a SD legislature try to sell a massive tax increase? By focusing on the difference between taxes and fees!

January 23, 2015

clipart-0082This year infrastructure funding is a top priority of the Governor’s administration and the Legislature. The very first Senate Bill (SB1) is the massive “revenue enhancement” bill coming from Senator Vehle and his Interim Committee on Highway Needs and Financing. During his State of the State address Governor Daugaard mentioned he is going to propose his own package. I have yet to look in-depth at either proposal (there is plenty of more imminent legislation to study). Either plan though would increase taxes dramatically. So what is a Republican legislature that often promises not to raise taxes to do in such a situation? Well, you try passing a resolution telling people they are wrong using the phrase “tax increase” so broadly!

Yesterday House Concurrent Resolution 1001 (HCR 1001) was filed. The stated purpose of HCR 1001 is “Recognizing the difference between the taxes and fees levied by the State of South Dakota.” It cannot be seen as coincidence that HCR 1001 would be submitted on the same year that one of two massive revenue enhancement bills will possibly be passed. It makes sense too. People generally are suspicious of tax increases, especially if people feel they are not doing well economically. Conversely, people generally accept higher fees with less griping. It is easier for the average person to understand that fees will increase because the service they are paying the fee for has higher costs. For that reason legislators (all around the country, not just in SD) love to “enhance revenues” via fees as much as they can, that way thier promises of not raising taxes (or at least doing very little of it) can be kept.

With that in mind, it might be worth reading HCR 1001  (it isn’t very long).

WHEREAS, a tax is a compulsory financial contribution levied by a government for the general support of the government and the services it provides; and
    WHEREAS, a fee is a charge levied by a government on specific persons, activities, or properties as payment for a direct benefit received; and
    WHEREAS, there is often confusion about the distinction between these two government funding mechanisms, and certain individuals and groups, particularly at times of an election, deliberately confuse voters about that distinction:
NOW, THEREFORE, BE IT RESOLVED, by the House of Representatives of the Ninetieth Legislature of the State of South Dakota, the Senate concurring therein, that there is a clear and distinct difference between the taxes levied by the State of South Dakota and the fees levied by the State of South Dakota and the agencies thereof, and that an increase in fees is not an increase in taxes.

Yes, there is technically a difference between a tax and a fee. Sometimes the difference is subtle, and some fees could be called a tax. But there is a reason many people (including myself) will outright call any new fee a tax. Simply put, legislators looking to “enhance revenues” have to do that through increased taxes and/or increased fees (technically revenue enhancements can come through penalties as well, but I’ll leave that out of this discussion). Additionally legislators could cut spending in other areas to free up revenue to be used in the desired area. Cutting spending in other areas is always tricky for legislators. Doing so will make one or more special interest groups angry and may have backlash. If the legislators focus on raising revenue through taxes it will cause constituents to be unhappy and may cost them during the next election.

So that leaves legislators focusing upon ways to increase revenue via fees. Fees are great for legislators to use. They can purposely look for ways to increase fees and not receive the political backlash that comes from constituents and special interest groups. They don’t have to work hard and find other areas of the budget that can be cut. Additionally they can keep their promise of keeping new taxes low by using a different method of revenue enhancement. That is exactly why many people (including myself) will continue to point that most fees are in reality taxes. The whole point of these fees is to raise revenue. Even though there is less political backlash from fees, fees can still cause the same economic hard upon the people who must pay them. If the legislature truly felt infrastructure should be paid by user fees they would propose dropping the gas tax altogether and movie to a fee-based system. But that will not happen. This is not a situation where a mixture of fees and taxes are being used to ensure the proper type of revenue enhance is chosen. Rather infrastructure funding revenue enhancements will use a mixture of fees and taxes to ensure that this massive tax hike seems smaller than it truly is.

Yes, the legislature is likely to pass this HCR. It won’t do anything. The people who call a fee out as a tax will continue to do so. The legislature will continue to look for any revenue enhancement it can without calling it a tax. Both sides will call the other side dishonest. I just find the biggest irony in this situation coming from the fact that many of the legislators that support this silly HCR are the same legislators that thought HCR’s were silly last year (remember that, Rep Nelson bringing HCR’s forward supporting Republican platform areas, and most of them being rejected by establishment Republicans).

  1. Merlyn Schutterle
    January 23, 2015 at 2:57 pm

    I think if it is really a fee, it should not go into the general fund. It should be marked to be used for that special project. However, it doesn’t really matter. It enhances revenue from the people. Fees are just another way the Republicans can lie about taxes. But on the other hand, we have to pay for the services we demand.

  2. lora hubbel
    January 23, 2015 at 6:02 pm

    What they are calling a “fee” in this resolution is actually an “excise tax”…and Excise tax is a tax inflicted on the people who benefit from the item taxed. I told this to them when I was in the legislature. They were calling something an “excise tax” then that really was not..they don’t care about words…words only means what they want them to mean.

    • Merlyn Schutterle
      January 24, 2015 at 9:38 am

      It’s like the constitution. The constitution says what the Supreme Court says it says.

    • Merlyn Schutterle
      January 24, 2015 at 10:05 am

      Lora, I handed you some important documents at the state fair. You thought they were just a stone, but they were a diamond in the rough. It was up to you to polish them up and kick Daugaard’s butt with them, but that is not what you did.

      You needed someone who knew the game that was being played, but you listened to your choir which didn’t have a clue. Mike did the same thing. Tara did him more harm than good. You got on the wrong wagon.

      I’m not done with Daugaard. If you really want the truth to come out, I will tell you, or Ken, how to do it. That is not likely to happen.

  1. January 23, 2015 at 11:59 am
  2. January 29, 2015 at 11:48 pm
  3. February 3, 2015 at 12:33 am
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