In Washington, There’s a Tax for Every Occasion

By Sen. John Thune
October 20, 2017

Death should not be a taxable event. Surprisingly, though, the idea that it would be such an occasion has become a political issue that can pit family-run farms and ranches against Washington’s political elite who think certain Americans, including some farm and ranch owners, should be taxed two or three times on their wealth. I simply disagree.

I don’t need to tell the hard-working farm and ranch families across South Dakota that they’re in a land-rich and cash-poor business. They know the assets on the business’ balance sheet far exceed the earnings that end up in the family checkbook. But for too many lawmakers in Washington, they just don’t seem to care.

The case against the death tax, which can hit families at the worst possible moment, is pretty straightforward. As everyone knows, an individual’s wages are taxed when they are earned. Interest, dividends, and capital gains from wages that are saved are then taxed again. When the owner of those assets passes away, the death tax can hit his or her earnings yet again – for a second or third time. It’s this extra assessment on previously taxed assets that folks, myself included, find so objectionable.

Wealth isn’t only measured by the amount of money a person has in his or her bank account. It’s also measured by non-liquid assets, like land or other property. That can spell trouble for a land-rich South Dakota family-run farm or ranch if the death-tax collector shows up at the door, particularly now, after the U.S. Department of Agriculture says cropland values have increased by 400 percent over the last 15 years. Remember, growth in land value doesn’t always translate into growth in cash from those assets.

For supporters of the death tax, their favorite talking point is that it hits a small number of family-owned businesses, farms, and ranches each year, as if that somehow justifies a confiscatory tax on a larger swath of Americans. What they conveniently fail to mention is the large expense – both in time and money – that farmers and ranchers invest during their lives to avoid being a death tax statistic. Too often, these folks have to hire costly lawyers, accountants, and estate planners, all of which can cost well over one hundred thousand dollars, to develop an effective estate plan. They can also spend tens of thousands of dollars each year in life insurance premiums – again, all just to avoid being a victim of the death tax.

Don’t take my word for it, though. A South Dakota rancher and estate planner recently wrote, “My brothers and I own an 8,000-head cattle feeding and finishing operation that will be threatened by the death tax if nothing changes … Repeal of the death tax means farmers, ranchers, and small business owners like me can stop wasting money on a tax that threatens our family’s future. That extra money can be spent more wisely in our local economy, which helps our community grow through increased jobs, wages, and purchasing.”

I get it. Many of my Democrat colleagues who support the death tax see it as an opportunity to raise revenue and spend it on other federal programs. They don’t think many farmers and ranchers pay the death tax, and for those who are fortunate enough avoid it, the tens of thousands of dollars they shell out to do so are just a mere inconvenience. In effect, they are punishing success by demanding another big tax at death. To those lawmakers, I’d say you need to meet more farmers and ranchers.

In my opinion, one family-run operation that’s forced to sell because of the death tax is one too many. Now is the time to bury the death tax once and for all, and I’ll continue my years-long fight to do so in the tax reform bill I’m working on in the Senate.

South Dakota Ends 2016 Fiscal Year With Another Surplus

South Dakota Ends Fiscal Year With Another Surplus

PIERRE, S.D. –  South Dakota state government closed the 2016 budget year on June 30 marking the fifth consecutive year with a surplus, Gov. Dennis Daugaard announced today. The state general fund budget for Fiscal Year 2016 ended with both lower expenditures and higher revenues than budgeted. 

The majority of the surplus was a result of state agencies demonstrating fiscal restraint.  State agencies spent $10.4 million, or 0.74 percent, less than appropriated. Additionally, revenue for Fiscal Year 2016 exceeded estimates adopted by the Legislature last March by $3.6 million, or 0.24 percent. In total, the state’s budget for Fiscal Year 2016 ended with  a $14.1 million surplus.

“This marks the fifth year in a row that we have maintained structural balance in our budget. This was my number one priority when I took office,” Gov. Daugaard said. “Even with our revenue stream being soft the past few months, all areas of state government were able to spend fewer tax dollars than appropriated to contribute to the budget surplus. Finishing Fiscal Year 2016 in the black puts South Dakota’s budget in a positive position as we begin the 2017 fiscal year.”

State agencies again remained within their appropriated budgets in FY2016. Collectively, the three branches of state government spent $10,427,398 less than appropriated. This reversion includes $2.4 million across all state government due to a decrease in the state paid health insurance rate; $2 million from the Board of Regents due to lower utility expenditures; $1.3 million from the Department of Human Services related to lower than anticipated operating expenditures and vacancies at the South Dakota Develomental Center; and $1 million from the Department of Social Services due to nominal variances in the utilization of services.

South Dakota’s sales and use tax receipts, the state’s largest revenue source, finished the fiscal year 0.71 percent below budgeted levels, but grew 2.91 percent compared to the prior year. Collections from the sales and use tax accounted for 58 percent of total general fund receipts in fiscal year 2016.

Sources of revenue with notable increases came from the bank franchise tax, severance taxes and insurance company tax, which grew 22.4 percent, 13.6 percent and 6 percent, respectively, over FY2015. Ongoing receipts to the general fund totaled $1,438,386,820 which grew 4.1 percent compared to the previous year. Total state general fund receipts were $1,496,940,642 for the recently ended fiscal year. 

South Dakota state government ended FY2016 by transferring $14.1 million to the Budget Reserve Fund, as required by law. The state’s Budget Reserve Fund now has a $113,379,805  balance and the General Revenue Replacement Fund has a $44,000,048 balance.

The combination of those two funds, totaling $157,379,853, represents a combined reserve of 10.8 percent of total general fund spending for FY2016.