SD lawmakers oppose sales tax boost to fix budget

AP News
Posted: Jan 04, 2010 5:41 PM

South Dakota lawmakers have no interest in increasing the state sales tax to fix the state's budget problems, according to a survey by The Associated Press.

Two-thirds of the legislators responding to the survey said they oppose increasing the sales tax to balance the budget in the next year or two.

House and Senate leaders said lawmakers want to balance the budget with spending cuts, not tax increases.

"I think one thing both parties seem unified on is to try to find a way to balance our budget without increasing taxes," said House Republican Leader Bob Faehn of Watertown.

House Democratic Leader Bernie Hunhoff of Yankton said sales tax revenue has fallen below expectations because people have reduced their purchases during the economic downturn, so boosting the tax would make no sense.

"To think the fix is to actually increase taxes on people who already can't afford to buy things is just backwards," Hunhoff said.

Gov. Mike Rounds has proposed a state budget that would use $32 million in reserves for the year beginning July 1, and he said the gap between ongoing revenue and ongoing spending could exceed $100 million in the following year unless tax collections begin to grow significantly. The Republican governor has said he will not propose a tax increase to solve the budget problem because he doubts lawmakers would pass a tax increase.

South Dakota now has a 4 percent sales tax. An increase of 1 percentage point, to 5 percent, would provide enough money to fix the budget gap.

Seventy-two of the 105 lawmakers responded to the AP survey by mail Dec. 14-31.

While two-thirds said they would oppose a sales tax increase, 11 percent said they would support such an increase. A quarter said they were undecided.

About 83 percent of the Democratic minority opposed a sale tax increase. Slightly more than half the Republicans who responded said they oppose it, while a third are undecided.

Senate Republican Leader Dave Knudson of Sioux Falls said he sees little chance that the Legislature would raise the sales tax. Lawmakers will look at cutting spending, probably through a combination of across-the-board cuts and the elimination of some programs, he said.

"I think we'll look at that through cost cutting," Knudson said.

Senate Democratic Leader Scott Heidepriem of Sioux Falls said he also wants the Legislature to cut state spending in a number of areas.

The sales tax should not be increased, particularly during an economic slump, because it hits lower income people the hardest, Heidepriem said.