Senator John ThuneAn old story many folks in Washington like to tell involves the friendship between President Ronald Reagan and Tip O’Neill, the Democratic Speaker of the House at the time. The story goes that often times after a long day the two leaders would meet up for a drink at the White House. They would put their partisan roles aside and converse as friends. The Senate recently had the opportunity to deliver on an important bill. What transpired was the equivalent of the Senate Republicans pouring a cold drink for Senate Democrats, and in response, getting that drink dumped on their head.
The Family Prosperity Act was an economic package that included a permanent reduction of the estate tax, an extension of the state sales tax deduction, and an increase of the minimum wage. The package failed in the Senate by a vote of 56 to 42. Sixty votes were needed to overcome a Democrat filibuster.
The bill would have delivered meaningful tax relief to South Dakota farmers, business owners and taxpayers. Unfortunately, partisans in the Senate chose to put politics before good policy; and as a result, tens of thousands of South Dakotans are set to face higher taxes.
The definition of a compromise is when both sides make concessions to find a solution in the middle. My Republican colleagues and I have long sought to permanently repeal the estate tax, or "death tax," which is an onerous tax imposed on the transfer of assets or property from the deceased to their heirs. For their part, Democrats have consistently sought to increase the minimum wage.
Congressional leadership forged a compromise bill that addressed both of these issues, and added several other tax relief extenders supported by both sides of the aisle. Like any compromise, some factions did not get everything they wanted and were unhappy. But Republicans came half way and supported the compromise bill. Unfortunately, the same can’t be said for my Democratic colleagues.
So what will be the consequence of these obstructionist tactics? If Congress doesn’t act soon, the death tax will come back to life and family businesses will suffer. Not only does the death tax burden South Dakota’s farmers and business owners; it hits them at the worst time—when they are dealing with the loss of a loved one. I’ve often said, the last thing families should have to see at their loved one’s funeral is the tax collector on the heels of the undertaker. Death should not be a taxable event.
In central South Dakota sits a 3,000 acre family farm operation. Not too big, not too small. Unfortunately a death recently occurred in the family. As a result, $750,000 will likely be paid in taxes. This is a huge amount of money for a farm operation where land values can make an operation look a lot more valuable on paper than it is in reality. In other words, farmers like this can often be “land rich” but “cash poor.” All their value is in the land. When a massive death tax bill comes due, the only option is often to sell the land to pay the unjust tax. Thus, a family legacy comes to an end.
This is a common example of a real South Dakota family farm that is facing the effects of the death tax. With the Family Prosperity Act, Republicans offered a compromise solution on death tax reform, by agreeing to a permanent reduction of the tax instead of repeal. But Senate Democrats were not willing to meet us halfway, and as a result, real farms and businesses in South Dakota now face an even higher death tax in the future.
The Family Prosperity Act would have also lowered taxes for all South Dakotans who itemize on their taxes by extending their ability to deduct state and local sales taxes in lieu of state and local income taxes.
South Dakota is one of eight states with state or local sales taxes, but no state income tax.
If the federal government allows individuals to deduct their state income tax, those living in states with no income tax should be allowed to deduct their state sales tax as well.
Finally, the package would have increased the minimum wage from the current $5.15 wage per hour to $7.25 over 36 months in three increments of 70 cents. This alone would have helped countless people in South Dakota and across the country who are working hard to provide for their families on a limited income.
Hopefully, we’ll have the opportunity to once again bring these important tax relief measures to the Senate floor. If that opportunity comes up, I hope my Democrat colleagues in the Senate will put politics aside and work together to pass these important incentives to keep rural America alive and strong. Just like Reagan and O’Neill used to do.