Change foreseen in SD bank taxes
PIERRE — The governor’s budget director told legislators Wednesday that reforms will be offered to stabilize South Dakota’s tax collections from credit card banks.
Jason Dilges said a few will pay more in taxes, while a few will pay less, and state government overall will receive less, but the revenue stream will be steadier.
A group of state officials, legislators and banking officials worked together during the past year on the proposed changes. The legislation will be introduced on behalf of Gov. Dennis Daugaard.
“It’s very volatile,” said Dilges, who is commissioner for the state Bureau of Finance and Management. “And it’s near impossible to build a budget estimate on that.”
He advised members of the Legislature’s Joint Committee on Appropriations they should track the legislation because of its importance in determining state government’s revenue.
The forecast for the current fiscal year from bank-card taxes was $16.6 million originally. That’s been revised by BFM to $9.5 million. BFM’s estimated for the coming year is $17.5 million.
Dilges recalled the $27 million refund that was necessary a few years ago.
“I’m glad we’re trying to get our arms around this,” said Rep. Dick Werner, R-Huron.
Dilges described the current tax formula as “antiquated” and said accurate estimates are difficult to make with it.
Rep. Susan Wismer, D-Britton, said she feels “like we’re in the same place as a year ago” when legislation was attempted on the topic. “You brought bills and the problem wasn’t solved.”
Dilges said South Dakota officials have conferred with counterparts in Delaware, Ohio and Nebraska who faced similar problems and made various changes. “They shared with us some things that went well and some that went not so well,” he said.
Sen. Jim White, R-Huron, participated in the work group. He cautioned against blaming the banks for the volatility in tax revenues.
“To get the consistency we want, we have to look at a different formula,” White said. “It’s not that they don’t want to pay. It’s the consistency we need to make it fair.”
Banks are taxed at a rate of 6 percent of net income in South Dakota. The tax revenue from credit-card banks is split 95 percent to the state treasury and 5 percent to the county where the bank is located.
Traditional banks’ tax revenue is designated 73.33 percent to the counties where they’re located and 26.67 percent to the state.
The state’s share from those traditional banks’ taxes was estimated to be $6.6 million for the current year. That’s been revised to $7.5 million. The estimate for next fiscal year is $8 million.
The governor said nine card banks would be affected by the changes he’s proposing.
“I don’t want it to be made into an ‘us versus them,’ ” Dilges said.