Vote NO on South Dakota’s Measure 25 Important questions will dominate the midterms for South Dakota voters, including who will be the next Governor? There will also be a chance for South Dakotans to decide critical initiatives. One terrible measure would increase taxes. Specifically, South Dakota Initiative Measure 25 would raise taxes on cigarettes by about $1 per pack, representing a 65 % increase in the current tax. The measure would also increase taxes on wholesale tobacco products anywhere from 35%-55% of the wholesale price.
Measure 25 is a tax increase in the name of technical schools, but in reality hands a blank check to government officials with no protections against waste, fraud and abuse.. There is nothing that stops government officials from diverting the funds to the general fund, which is something that we have seen before. In 2015, politicians repealed earmarks from the last increase in tobacco taxes and diverted millions of dollars to the general fund.
In addition, history shows most excise taxes fall short of the projected revenue. The failure to generate projected revenue comes with an added price of more tax increases and creates more problems for the state budget. Tobacco tax increases also harm local businesses and consumers, while encouraging illicit activity.
Earlier this year, South Dakota was ranked as the Second-best state for businesses in the United States. The study showed that the regulatory/spending/tax structure of the state was only behind for most friendly to businesses. A regressive tax increase that disproportionately hits businesses and the middle class, exactly what Measure 25 will do, will only harm South Dakota’s positive business climate. Voters would be wise to reject the tax increase.
States that go the route of these kinds of excise tax increases rarely see the revenues projected:
IL- A state notorious for tax increases is Illinois. They increased taxes on tobacco in 2013 and yet the revenue hasn’t been anywhere near what the state told taxpayers it would be. According to a recent study, from the Illinois Department of Revenue, the cigarette tax increases were more than $100 million short in revenue projections.
NY- New York has continually increased their tobacco tax rates and they keep missing out on revenues, despite having the top tax rate. The state lost well over $1 billion in revenue in the last decade and they still haven’t learned why increasing taxes is a terrible policy with terrible results.
Washington, D.C.- In 2009, the District of Columbia raised taxes by .50 cents but missed revenue projections by $15 million.
South Dakotans should reject Measure 25. Tax increases on tobacco will most likely be diverted from the stated purpose and also result in the need for more tax increases when revenues come up short. Totally unnecessary and counterproductive.
South Dakota lawmakers have been working to make sure they are addressing the need for responsible spending and budget policies. Tax increases will only lead to more tax increases, which might force businesses to close and in turn, harm consumers. South Dakota doesn’t need to increase taxes and rely on revenues unlikely to be generated only to have to go back to more tax increases.
South Dakota should reject tax increases and oppose Measure 25.