WOSTER: A look back at the 'Liar's Tax'
Time was, South Dakota asked its citizens to wander through their homes and garages once a year and make a list of their personal property.
Until 1978, the state taxed such property. I remember walking around in our rented home on North Conklin in Sioux Falls in the late 1960s. A beat-up electric drill, Nancy's modest collection of jewelry, shelves of books, our portable record player, a Sears, Roebuck and Co. washing machine and so on. I pondered which belonged on the list and which were not considered personal property. I balked briefly at listing the 12-string guitar Nancy bought me for $40 at a pawn shop in St. Paul. Being a responsible citizen, I eventually wrote it down.
Nancy was in college at St. Catherine's when she scouted the Twin Cities' pawn shops for a serviceable 12-string acoustic guitar. I'd been playing (not well, but enthusiastically) a six-string guitar since my early teen years. Six strings satisfied me until I visited Nancy at college one weekend and we saw Dave Ray playing 12-string blues at the Triangle Bar near the West Bank. I had to have such an instrument, and Nancy came through for Christmas that year. (I gave her a cedar-lined hope chest.)
But, we are talking taxes here. When we moved from Sioux Falls to Pierre in the fall of 1969, we left a forwarding address. Even so, the county we left was slow to catch up with us for personal property tax purposes. Revenue from the personal property tax went to local governments, you see. When the old bill finally found its way to our residence in Pierre, it included a late-payment penalty. I protested, "I never got a bill.'' "Not our problem,'' they replied. We paid. Can't fight county hall.
The self-listing nature of the tax encouraged otherwise upstanding citizens to fudge a little on their inventory of belongings. I recall the late Sen. George Shanard, of Mitchell, saying he checked tax records and found only two diamond rings listed in his county. Maybe none of the married couples exchanged rings, he suggested.
By 1978 — 40 sessions of the South Dakota Legislature ago — the personal property tax had fallen out of favor. Nobody liked it. More than a few citizens were less than cash-register honest in their filings. People routinely called it the "Liar's Tax.'' Buoyed by a $16 million budget surplus, then-Gov. Dick Kneip and the legislators decided to repeal the tax. They also pledged that the state would make up the revenue local governments would lose. That turned out to be $40.7 million.
What's that, you say? The math doesn't work? $16 million surplus and $40 million in lost revenue? You're right, but legislators could do the math, too, some of them. They took a bold step and raised the state sales tax. But, wait, you stammer, 1978 was an election year. It's great to repeal a tax just before an election, but not so great to increase another. True enough. The Legislature created a committee to seek other ways to replace the missing revenue. If that committee failed to find alternatives, the sales tax increase would kick in. "I'd gladly pay you Tuesday for a hamburger today,'' as Wimpy in the Popeye comics said.
As I recall, the committee, and the 1979 Legislature, found ways to broaden the sales tax, raising more money while allowing the increase to fall back to where it had been. They enacted a contractor's excise tax and tweaked a few other things to raise about $40 million. No more Liar's Tax.
I bought a new 12-string about that time. Gave the old one to Nancy's kid brother. Last time I saw it, the strings and tuning pegs were gone, it was painted a sea-foam green and it had a hole punched in the sound box. I was glad Dave Ray wasn't around to see what someone had done to a 12-string guitar. (In his hands, it could have made magic. In mine, it had made sounds that sometimes were even harmonious.)
We still have the hope chest. I don't recall ever listing it for personal property tax purposes. Lucky they repealed that thing.