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Wednesday, May 13, 2009

Lunch Notes: Income Up, Spending Down, Johnson Undecided

Miss K and I are sharing yogurt and applesauce for lunch. Here are some news notes for you to snack on over your lunch break:
  • Personal income rose 3% in South Dakota in Q4 2008. It rose faster in Minnesota (3.6%), Iowa (3.8%), and North Dakota (6.7%)... all of which have income taxes. Tell me again how income tax stifles a state's economy?
  • South Dakota's per capita personal income in 2008 was $37,375. I'm below average! Yahoo! How about you? And how about your high school English teacher?
  • Maybe we're making more, but we're spending less. Retail sales dropped 0.4% in April. I still say less consumer spending is a good thing... keep on saving, America! Buy less, live more: it's the Christian thing to do!
  • Senator Tim Johnson says he's not sure how he'll vote on new consumer protection legislation that would tighten rules on credit card usurers (HR 627). Prediction: Dems know they have the votes to pass this necessary legislation. They'll probably get half of the Senate Republicans to come along, just as they did in the House. Johnson will be free to cast a "Nay" to placate the Sioux Falls usury industry.
Now if you'll excuse me, my lunch date and I need more yogurt.


  1. As an opponent of a state income tax, I'll put in my two quatloos' worth here.

    Of the neighboring states mentioned, North Dakota most closely resembles us (in my view), and personal incomes rose almost twice as fast there as they did here. Only Nebraska (far more urban in the east) saw a rise smaller than ours. Wyoming was not mentioned (no income tax there) nor was Montana (steep income tax but no sales tax).

    I don't know if the existence (or lack) of a state income tax has much of anything to do with a state's economic strength in the long term. There are simply too many other factors that enter the equation, such as climate, ethnicity, urbanization, and proximity to the ocean. However, I do suspect that if South Dakota were to suddenly impose a state income tax on top of existing taxes, it would have an immediate (but perhaps not lasting) negative effect because it would immediately (although maybe only temporarily) reduce most people's take-home personal income.

    I don't think that the data presented by this study is anywhere near substantial enough to draw significant conclusions about cause and effect. These figures look to me like "economic static crashes." You know, a big burst here, a smaller burst there ... the data only involves a three-month period.

    The other day I was talking to a real red-dog Republican friend who said he wouldn't be too averse to a corporate income tax here, but he's retired so it wouldn't affect him. The best tax is, of course, the one that other people pay.

  2. I agree, Stan, that the above numbers are far from enough data on which to establish any cause-and-effect relationship. I offer them simply to counter the cause-and-effect argument our governor and others like to make, that having no income tax gives us a better economy than surrounding states.

    You may be right that suddenly imposing an income tax would have some immediate economic effects. I wonder: could we "soft land" such a new tax, do a seven-year implementation period in which the income tax rate goes up 1% each year while the state sales tax goes down 1%, followed by property tax going down 1% (or whatever numbers would offset)?

  3. I wouldn't mind getting rid of the sales tax and lowering the property tax, as long as we could be reasonably sure that they wouldn't come back or go up again.

    I recall reading on one of those education-related Web sites that schools are happy with the Montana system, where there's no sales tax, low property tax, but significant income tax. Montana was one of the few states (if not the only state) that I saw on that Web site for which educators had mainly positive things to say.

    Of course, I could have been dreaming. These days, it's hard to tell what's a dream and what's reality. I suspect, however, that one of the chillier realities is that a new income tax in South Dakota would translate into higher taxes for everybody in the long term.

    I suppose if we, the people of the state of South Dakota want bigger government, we'll figure out a way to get it. If we don't want it, I hope we'll keep it at bay. I have mostly negative sentiments about it. Old red dogs die hard.


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