Legislators propose to fill the $54 million gap between spending plans and revenue projections with a series of tax hikes: a cigarette tax bump to $1 (projected to raise $30 million), a 25-cent hike on bar drinks ($16 million), and a temporary 1-cent sales tax jump (applied during tourist season). Definitely not on the table, according to Gov. Mike Rounds, was an income tax.
But reliance on sales taxes, according to a January report by the Institute on Taxation and Economic Policy, is the principal reason the state ranks in the top 10 nationally in regressive taxation. The richest 1 percent of South Dakotans pay 2.3 percent of their income in state and local taxes, says ITEP's analysis, while middle-income families pay 9 percent and the state's poorest pay 10 percent. Comparable national figures are 7.3 percent for the richest, 9.9 percent for the middle-income and 11.4 percent for the poorest.
—Douglas Clement
