South Dakota Democrats started a petition effort Thursday aimed at forcing a statewide public vote on Republican Gov. Dennis Daugaard's program to continue giving refunds on construction taxes to large industrial projects.
Petitions filed with the secretary of state's office on behalf of State Democratic Party Chairman Ben Nesselhuf seek to refer a law passed at Daugaard's urging by this year's Legislature.
Democrats must gather 15,855 signatures, equal to 5 percent of total votes cast in last year's gubernatorial election, by June 27 to put the measure on the November 2012 ballot, Secretary of State Jason Gant said.
Members of the Democratic minority opposed the governor's bill throughout the recently completed legislative session, but the solid Republican majorities in the House and Senate were able to pass it easily.
Nesselhuf said it doesn't make sense to earmark an estimated $16 million a year for handouts to corporations at a time the governor and the Legislature cut state spending on aid to school districts and reimbursements to nursing homes and other facilities that care for poor people in the Medicaid program.
Nesselhuf said Democrats do not necessarily object to tax refunds aimed at stimulating economic growth, but the money should come from some source other than the general fund that supports state government's operations.
"This issue isn't whether or not corporate welfare works or whether or not we should fund it. The issue is should we take money away from the general fund which could otherwise go to schools and nursing homes in order to subsidize this," Nesselhuf said.
Daugaard has argued his plan to change the tax refund program could save an estimated $7 million a year by giving refunds or incentives only to industrial projects that would not be built in South Dakota without the tax break.
Tony Venhuizen, the governor's communications director, said Thursday that Daugaard believes the refund program is an important tool for creating jobs and expanding South Dakota's economy. Democrats are wrong to argue the money for incentive payments could be used for other purposes because those incentives will be financed by taxes eventually paid by projects that otherwise would not be built, he said.
"What the opponents of the program don't understand is these incentives will only go to construction projects that wouldn't otherwise happen," Venhuizen said.
The current program gives large projects $23 million a year in tax refunds, Venhuizen said. The revamped program will spend only an estimated $16 million a year, a savings of $7 million, he said.
"We're generating more economic activity. The governor believes we'll create more tax revenue and have more money for school and for Medicaid and for the rest of state government as a result," Venhuizen said.
The tax refund program has existed for years, but the Legislature last year reduced the size of the refunds and scheduled the program to end in December 2012.
The change approved this year extends the program instead of letting it end. It would take 22 percent of the contractor's excise tax collected by the state each year and put that money into a fund that would be used to pay tax refunds or grants to industrial construction projects costing more than $5 million.
Such refunds would not be automatic, but instead would have to be approved by the state Board of Economic Development, which would give refunds only to projects it believes would be built in South Dakota only if they get a tax break.