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Friday, October 2, 2009

SoDak Soda Tax: $20 Million. Hike Hooch Tax: $29 Million

Scott Munsterman won't get the chance to wave his magic budget wand until 2011. In the meantime, we face a potential $150 million shortfall in the South Dakota State Budget next year. Remaining stimulus dollars will cover less than half of that. The Legislature will need to cut programs or raise taxes. Or both.

For perspective, read this year's budget:
  • $150M is 13% of the current fiscal year general fund.
  • You could shut down the state's ag and natural resources programs, the Legislature, all state elected offices, the Unified Judicial System, and the entire state bureaucracy... and you'd still have to find another $20M of cuts to balance the budget.
Ready to talk new taxes? Try the sodapop tax. This super-duper online calculator from the Rudd Center for Food Policy and Obesity (they're at Yale—they're smart!) let's you figure out how much revenue a soda tax would generate in your neck of the woods. You punch in your state (or your favorite big city—unbelievably, no Yankton!) and your preferred tax-per-ounce, and presto! Dollar signs.

So suppose South Dakota taxed pop and other sugar-sweetened beverages at one cent per ounce, not quite a quarter on your 24-ounce root beer. The Yalies say that tax would bring $19.7 million into South Dakota's coffers each year. Add fruit drinks, Gatorade, and other sugared drinks, and you get $37.9 million. Get all fizzy and count your diet beverages, and you can avoid over $61 million of program cuts.

$61 million dollars. From one tax. A consumption tax, of which many of my conservative friends are enamored. A tax on an utterly non-essential item.

Now I'd rather see a tax increase on alcohol, which has much more harmful effects than pop or even that other recreational substance Mr. Newland just got out of the pokey for. And what do you know: there's an online calculator for hooch tax, too! Cool!

The nice folks at the Marin Institute note that we haven't changed our beer excise tax since 1988, which means its value has fallen 45% due to inflation. If we tacked just one penny per ounce onto beer, wine, and liquor, we could plug another $29 million of our budget deficit hole.

And hey, given that the Legislature's hooch committee just voted to consider allowing liquor sales on Christmas Day, there's another boost to tax revenues. (Our man Senator Russell Olson voted with the slim majority, 6–5, to let the measure proceed. Russ, I am so eager to hear how you will vote in the full Senate on... Christmas spirits.)

Raising taxes is not my goal. Preventing a financial train wreck in Pierre is. If anyone has a plan for doing that without raising taxes, fire away. But understand, we face some serious choices come January. A new tax on pop and an increased tax on alcohol are two serious proposals we need to consider.


  1. To cover the highway funds I say remove the ethanol subsidy. You are still using the roads, we need to maintain them, and ethanol should be able to stand on its own.

  2. The booze tax could be used to pay for the Unified Judicial System. This tax would even have a rational basis since many crimes are committed under the influence. Sort of a user fee to help cover costs associated with the product being taxed.

  3. I like the soda tax and booze tax, if they were enacted for the purpose of the budget crunch it should expire after a couple years... assuming we can trust them to do that.
    I do notice the state aid to schools has gone from 328 Million in 2007 to 375 Million in FY2010. I'm a little curious what caused that jump. Maybe it's time to try out those voucher programs for private and home schools.
    The largest spending outside education is Medical and Adult Services. I'm not sure everything this entails. I just see that even a 1% change would save 69 Million. That could be legally impossible but maybe we can make them Canadian citizens.

  4. Dios mio! I won't be able to afford my Diet Dew any more. Oh, well. The stuff dissolves human brain tissue, as anyone who reads my comments can plainly see. I'll be better off without it. C'est la vie.

  5. "Sort of a user fee to help cover costs associated with the product being taxed."

    Nick, do you mean that this would be a tax to cover the cost of administering itself?

    Term of the day: recursive taxation!

  6. There's that Wasson guy again, showing a willingness to lead a discussion about hard choices... hmmm...

    Roger: a temporary tax? Hmm... we can talk sunset....

    Stan: I think Nick has in mind the idea that alcohol creates lots of social problems and court costs, so it makes sense to lay a tax on the folks using (and abusing) that product. But generally, your comments show little to no sign of Diet Dew impairment. (If there's more Gibilisco brain power waiting to be unleashed when you ditch the Dew, look out, world! :-) )

  7. caheidelberger said (and I thought we were leaving our "full name"? I am): alcohol creates lots of social problems and court costs, so it makes sense to lay a tax on the folks using (and abusing) that product.

    How does it makes sense that the folks who are using as opposed to abusing the product should pay more? I'm a moderate drinker. My drinking has never cost anyone a penny of court costs, although I will admit to dropping a few glasses (which I always cleaned up myself, so that's a wash). If I'm no more a source of social problems and courts costs than a non-drinker...why am I paying? That doesn't make sense to me.

    A tax on booze -- or soda! -- doesn't make any sense anyway. We don't have special taxes on pork, or pencils, or garden hoses, or cut flowers...why beer? It's because putting taxes on something not everyone uses is easier politically than raising everyone's taxes. Yet, if everyone benefits from the government programs these taxes are supposed to be paying for...shouldn't everyone be paying for them? That's fair. That makes sense.

  8. [Hey, Lew: check the comment policy and the link: my name is fully verifiable in multiple places. Stick with the issues.]

  9. Now, on the issues, I'm all for a tax that everyone pays. But you identify a problem from which South Dakota suffers keenly: political cowardice and an unwillingness to pay our way collectively. Our reliance on ga,bling is the best example of this fiscal irresponsibility. I much prefer an income tax, the best balance of shared contribution with acknowledging ability to pay. But if South Dakota's in this big of a hole, we need to put every option on the table.

  10. You have a point Lew. But, the problem is it's kinda hard to figure out who will abuse alcohol and be a social burden prior to their actually becoming a social burden. You can imagine the difficulty at the point of sale trying to administer different tax rates for the same product based on who the buyer is.

    Nick pays more because we know he will get drunk, kick out car windows in the parking lot, then go home and shoot his wife. Lew pays less because he is meek and mild as a kitten and would never do anything wrong. Now can Nick get a rebate in this multilevel tax system if he just walks home and quietly goes to bed?


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