A Tax Crime?

Is economic development a "criminal enterprise"?

Recently Sioux Falls Mayor, Paul TenHaken, was complaining about losing about $2.5 million in property tax revenue per year to give the citizens of South Dakota a very small tax reprieve. At the same time TenHaken was complaining about a loss in tax revenue, he continued to promote economic development, “…it’s essential we continue to think big with visions like the Riverline District...”

The problem is economic development takes money, in the form of taxes, from families and gives it to corporations. Right now the average Sioux Falls family of four is paying almost $13,000 in taxes and fees to the city each year. That’s on top of about $1500 that goes to the county and another $19,000 that goes to the state (then there are taxes to the Federal Government). With real inflation chugging along between 9%-14% per year and much slower wage growth, people are overwhelmed trying to make ends meet.

Interestingly, Sioux Falls and Rapid City have the lowest unemployment rates in the country, yet the Sioux Falls and Rapid City mayors (TenHaken and Salamun) are still pushing economic development, taking tax income from citizens and giving it to corporations. The governor’s office is also pushing economic development and the legislature is encouraging him (giving him a two year reprieve on returning unused economic development dollars to the taxpayers).

So what really goes on behind the scenes in economic development and how can these wealth transfer programs lead to a financial cascade?

The first step is to bring an economy to full employment (like the economies are in Rapid City and Sioux Falls). Then keep real inflation between 9% and 14%, like it has been since 1997. Bring in companies and exempt them from sales taxes and fees. Then, rather than pay the types of wages necessary to attract talent, companies offer jobs at the current rates and complain (loudly) when they can’t find workers. News about a “labor shortage” travels and the companies start reaching out to our governor and our Washington DC delegation begging for foreign work visas. Thune, Rounds, and Johnson and our governor deliver not only foreign workers, but a huge burden for the taxpayers.

Many things are not fully disclosed to the foreign workers. Often the wages they earn are not enough to support them and their families. Foreign work visas are restrictive, so it is nearly impossible for them to change jobs (they are basically indentured servants).

Many things are not disclosed to the taxpayer either:

• the supposed labor shortage has nothing to do with a real shortage of workers, but a willingness of the employer to pay high enough wages to attract people to the jobs

• holding down wages impacts citizens, because their wages stagnate and as inflation climbs their their standard of living declines

• stagnating wages during periods of relatively high real inflation pulls people who would normally be above the poverty line, below it

• the depressed wages means communities now have foreign workers and citizens in poverty which leads to crime (many of the people in prison are below the poverty line)

• the children of foreign workers add an additional burden to the school system, because the children are often below grade level and do not speak the language

• foreign workers and citizens and their families have to live in taxpayer subsidized housing, because they are not earning enough to cover the cost of housing

• foreign workers and citizens and their families have to be given taxpayer funded food subsidies because they are not earning enough to cover food

• foreign workers and citizens are not making enough to cover transportation, so the taxpayers have to pay for public transportation

• foreign workers and citizens and their families add a strain to the medical system, because they do not have the money to pay for medical coverage so the taxpayer has to pick up the cost through taxpayer funded indigent care (health and social services are over 30% of the state budget)

So it looks like we might be able to get our spending and taxes in line if we could keep our elected officials from using economic development to “steal” our money and give it to corporations that in turn hire foreign workers and depress wages. That way we can keep people out of poverty, off social programs, and out of prison. This one step alone could cut hundreds of millions out of the state budget.