South Dakota Initiated Measure 25, Tobacco Tax Increase Initiative (2018)

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South Dakota Initiated Measure 25
Flag of South Dakota.png
Election date
November 6, 2018
Topic
Taxes and Tobacco
Status
Defeatedd Defeated
Type
State statute		Origin
Citizens

The South Dakota Tobacco Tax Increase Initiative, Initiated Measure 25, was on the ballot in South Dakota as an initiated state statute on November 6, 2018.[1] It was defeated.

A "yes" vote supported increasing the tax on cigarettes from about $1.53 per pack of 20 cigarettes to $2.53 per pack of 20 cigarettes and increasing the tax on wholesale tobacco products from 35 to 55 percent, with a portion of tobacco tax revenue dedicated to technical institutes.
A "no" vote opposed increasing the tax on cigarettes from about $1.53 per pack of 20 cigarettes to $2.53 per pack of 20 cigarettes and increasing the tax on wholesale tobacco products from 35 to 55 percent, with a portion of tobacco tax revenue dedicated to technical institutes.

Election results

South Dakota Initiated Measure 25

Result Votes Percentage
Yes 148,775 44.89%

Defeated No

182,654 55.11%
Results are officially certified.
Source

Overview

What was the initiative designed to do?

Tax increase

Initiated Measure 25 would have increased the excise tax on cigarettes from 76.5 mills to 126.5 mills, or about $1.53 per pack of 20 cigarettes to $2.53 per pack of 20 cigarettes. The measure would have also increased the excise tax on wholesale tobacco products from 35 percent to 55 percent of the purchase price.[1][2]

Revenue allocation

As of 2018, the first $35 million in tobacco tax revenue each year was allocated by state law to the general fund ($30 million) and tobacco use prevention ($5 million). Revenue beyond the first $35 million was set to go into the general fund by default.

Initiated Measure 25 was designed to dedicate the next $20 million in excess of the already explicitly allocated $35 million in revenue from the state's tobacco taxes to lowering the tuition of technical institutes; providing scholarships to technical institute students; and providing funding for workforce training and curriculum, partnerships between technical institutes and employers offering paid internships and apprenticeships, and the expansion of technical education for high school students. In 2017, revenue from the state's tobacco tax was $60.38 million. Under the tax rates in effect in 2018, state officials estimated that revenue in 2018 would be $60.03 million.[1][3]

Status of tabacco taxes in South Dakota and the U.S.

The last time South Dakota raised its tobacco tax rate was through the approval of a citizen initiative in 2006 that increased the rate by $1.00 per pack of 20 cigarettes and from 10 percent to 35 percent for wholesale.

Under the tax rates in effect going into the election, South Dakota's excise tax on tobacco was 19 cents below the average across all 50 states, which was $1.72 per 20-pack of cigarettes in 2018. The average state cigarette tax across the six states that share a border with South Dakota was $1.3 per 20-pack. Click here to see a map of tobacco taxes by state.[4]

State of the ballot measure campaigns There was one ballot measure committee, Tuition4TechStudents, registered in support of the measure. Tuition4TechStudents had raised $1.08 million and spent $1.02 million. The top donors in support of this initiative were First Premier Bank ($208,333), Midwest George Michelson ($58,000), Muth Electric Inc. ($108,333).[5][6]

Ballotpedia identified two committees registered to oppose the measure: South Dakotans Against Higher Taxes and South Dakota Republican Ballot Question Committee. The South Dakota Republican Ballot Question Committee had not reported any campaign finance activity. South Dakotans Against Higher Taxes had raised $6.45 million and had spent it all. Altria Client Services and RAI Services Company were the largest donors. Of the total contributions, $4.39 million was a loan from Altria Client Services.[6] Altria Client Services is a producer and marketer of tobacco and cigarette products. They describe their companies—which include the makers of Marlboro cigarettes, Copenhagen, Skoal, Black & Mild cigars, and Mark Ten vapor products— as "the undisputed market leaders in the U.S. tobacco industry for decades."[7]

Text of measure

Ballot title

The ballot title was as follows:[1]

“ An initiated measure increasing the State tobacco tax and creating a postsecondary technical institute fund for the purposes of lowering student tuition and providing financial support to the State postsecondary technical institutes.[8] ”

Ballot summary

The ballot summary was as follows:[1]

“ This measure increases the State tax on tobacco products sold in the state. The tax on packs containing 20 cigarettes would increase $1.00 per pack, and 25-cigarette packs would increase $1.25 per pack. Tax on other types of tobacco products such as cigars, roll-your-own, and chewing tobacco would change from the current rate (35% of the wholesale price) and be increased to 55% of the wholesale price.

The measure also creates a postsecondary technical institute tuition reduction and workforce training fund that will be administered by the State Board of Technical Education, which oversees the State postsecondary technical institutes. Currently there are four: Lake Area Technical Institute, Mitchell Technical Institute, Southeast Technical Institute, and Western Dakota Technical Institute. The fund's purposes include lowering tuition and providing financial support for these technical institutes.

Under current law, the first $30 million of tobacco tax revenue collected annually is deposited into the State general fund, and the next $5 million is deposited into the existing tobacco prevention and reduction trust fund. This measure would require the next $20 million to be deposited into the technical institute fund created by this measure.[8]

”

Readability score

See also: Ballot measure readability scores, 2018
Using the Flesch-Kincaid Grade Level (FKGL and Flesch Reading Ease (FRE) formulas, Ballotpedia scored the readability of the ballot title and summary for this measure. Readability scores are designed to indicate the reading difficulty of text. The Flesch-Kincaid formulas account for the number of words, syllables, and sentences in a text; they do not account for the difficulty of the ideas in the text. The attorney general wrote the ballot language for this measure.


The FKGL for the ballot title is grade level 22, and the FRE is -5.4. The word count for the ballot title is 32, and the estimated reading time is eight seconds. The FKGL for the ballot summary is grade level 14.6, and the FRE is 31.3. The word count for the ballot summary is 184, and the estimated reading time is 49 seconds.

In 2018, for the 167 statewide measures on the ballot, the average ballot title or question was written at a level appropriate for those with between 19 and 20 years of U.S. formal education (graduate school-level of education), according to the FKGL formula. Read Ballotpedia's entire 2018 ballot language readability report here.


Full text

To read the full text of the measure, click here.

Support

Tuition4TechStudents led the campaign in support of the measure.[5]

Supporters

Rep. Mark Mickelson (R-13), speaker of the South Dakota House of Representatives, proposed the ballot initiative. He also proposed a Ban Out-of-State Contributions to Ballot Question Committees Initiative.[9]

Arguments

  • Rep. Mark Mickelson (R-13) said, "You talk to anyone in Yankton or out in western South Dakota and those folks end up going to Norfolk, Nebraska, or Gillette, Wyoming. We can't compete. Workforce development is a critical issue and I think we have a responsibility to act."[9]

Opposition

South Dakotans Against Higher Taxes led the campaign in opposition to Measure 25.[10]

Opponents

Arguments

  • Rep. Elizabeth May (R-27) stated, "They're citizens of South Dakota for crying out loud. You just can't keep taxing people. Quit spending and taxing and utilize what we already have available."[9]
  • Jason Glodt, grassroots director for South Dakotans Against Higher Taxes, said, "It hurts small businesses. It's a $35 million tax increase on small businesses in our state."[10]
  • Board members of the South Dakota Retailers Association said, "IM-25 is projected to take at least $25 million per year from South Dakota taxpayers. Yet, 20 percent of the money from this tech school tax is not even slated for tech schools – it will simply be poured into the general fund... IM-25 sets a bad precedent that threatens our state’s business-friendly climate. Passage of IM-25 will pave the way for others to use the initiative process to target new taxes at select groups and dedicate revenues to fund their favorite programs. The legislature, not the ballot box, is the appropriate forum for addressing our state’s tax and spending policies."[11]

Campaign finance

See also: Campaign finance requirements for South Dakota ballot measures

There was one ballot measure committee, Tuition4TechStudents, registered in support of the measure. Tuition4TechStudents had raised $1.08 million and spent $1.02 million. The top donors in support of this initiative were First Premier Bank ($208,333), Midwest George Michelson ($58,000), Muth Electric Inc. ($108,333).[5][6]

Ballotpedia identified two committees registered to oppose the measure: South Dakotans Against Higher Taxes and South Dakota Republican Ballot Question Committee. The South Dakota Republican Ballot Question Committee had not reported any campaign finance activity. South Dakotans Against Higher Taxes had raised $6.45 million and had spent it all. Altria Client Services and RAI Services Company were the largest donors. Of the total contributions, $4.39 million was a loan from Altria Client Services.[6] Altria Client Services is a producer and marketer of tobacco and cigarette products. They describe their companies—which include the makers of Marlboro cigarettes, Copenhagen, Skoal, Black & Mild cigars, and Mark Ten vapor products— as "the undisputed market leaders in the U.S. tobacco industry for decades."[12]

Cash Contributions In-Kind Contributions Total Contributions Cash Expenditures Total Expenditures
Support $1,015,939.30 $64,537.22 $1,080,476.52 $951,519.30 $1,016,056.52
Oppose $5,954,553.00 $497,629.81 $6,452,182.81 $5,954,553.00 $6,452,182.81
Total $6,970,492.30 $562,167.03 $7,532,659.33 $6,906,072.30 $7,468,239.33

Support

The following table includes contribution and expenditure totals for the committees in support of the measure.[6]

Committees in support of Initiated Measure 25
Committee Cash Contributions In-Kind Contributions Total Contributions Cash Expenditures Total Expenditures
Tuition4TechStudents $1,015,939.30 $64,537.22 $1,080,476.52 $951,519.30 $1,016,056.52
Total $1,015,939.30 $64,537.22 $1,080,476.52 $951,519.30 $1,016,056.52

Donors

The following were the top donors to the committee.[6]

Donor Cash Contributions In-Kind Contributions Total Contributions
First Premier Bank $208,333.00 $0.00 $208,333.00
Muth Electric $108,333.00 $0.00 $108,333.00
George Mickelson $58,000.00 $0.00 $58,000.00

Opposition

The following table includes contribution and expenditure totals for the committees in opposition to the initiative.[6]

Committees in opposition to Initiated Measure 25
Committee Cash Contributions In-Kind Contributions Total Contributions Cash Expenditures Total Expenditures
South Dakota Republican Ballot Question Committee $5,954,553.00 $497,629.81 $6,452,182.81 $5,954,553.00 $6,452,182.81
Total $5,954,553.00 $497,629.81 $6,452,182.81 $5,954,553.00 $6,452,182.81

Donors

The following were the top donors to the committee.[6]

Donor Cash Contributions In-Kind Contributions Total Contributions
Altria Client Services $5,944,553.00 $233,643.50 $6,178,196.50
RAI Services Company $45,000.00 $231,842.48 $276,842.48
Americans for Prosperity $0.00 $240.00 $240.00

Methodology

To read Ballotpedia's methodology for covering ballot measure campaign finance information, click here.

Media editorials

See also: 2018 ballot measure media endorsements

Support

Ballotpedia did not identify any media editorials in support of Measure 25. If you are aware of one, please send an email with a link to editor@ballotpedia.org.

Opposition

  • The Rapid City Journal wrote: "We also know smoking disproportionately involves the poor. While smoking may start as a choice, it quickly becomes an addiction. A pack-a-day smoker would need to dole out another $360 a year if this becomes law. The burden could push many to need government assistance or even prevent them from seeking technical education."[13]
  • The Argus Leader wrote: "Although increased price has proven to be the top deterrent to teens starting to use tobacco, this measure arbitrarily gifts what would hopefully be a diminishing source of revenue to tech schools alone, rather than to broader educational needs or toward beefing up tobacco-use cessation and prevention efforts."[14]

Background

Tobacco tax initiatives in South Dakota

In 2006, voters approved Initiative 2, which increased the tobacco tax from 53 cents to $1.53 per 20-pack of cigarettes. Initiative 2 allocated the first $30 million of revenue from the $1 tax increase to the general fund, the next $5 million to tobacco prevention and reduction, and the remaining amount to the property tax reduction fund, education enhancement trust fund, and healthcare trust fund. The tax increase went into effect on January 1, 2007.[15]

State tobacco taxes

Below is a map detailing state tobacco excise taxes in all 50 states, plus the District of Columbia, as of January 1, 2018. The federal government levied a $1.01 tobacco tax in 2018. In 2018, Connecticut and New York had the highest tobacco taxes at $4.35 per 20-pack of cigarettes. Missouri had the lowest tobacco tax at 17 cents per pack of cigarettes.[4]

In 2018, the average state tobacco tax was $1.72 per 20-pack of cigarettes.[4] In 2017, the average state tobacco tax was $1.68 per 20-pack of cigarettes.[16] In 2016, the average state tobacco tax was $1.65 per 20-pack of cigarettes.[17]

In 2018, South Dakota's excise tax on tobacco was equal to $1.53 per 20-pack of cigarettes, putting the state 19 cents below the national average. Including the federal excise tax on tobacco, the total tax on a 20-pack of cigarettes in South Dakota was $2.54.[4]

South Dakota technical institutes

The ballot initiative was designed to dedicate the first $20 million in excess of $35 million in tobacco tax revenue to the South Dakota Board of Technical Education. The state Board of Technical Education would have been permitted to use the revenue for lowering tuition, scholarships, workforce training and curriculum, partnerships between technical institutes and employers offering paid internships and apprenticeships, and expanding technical education for high school students.[1]

The state Board of Technical Education was established on July 1, 2017, to oversee the state's four technical institutes: Lake Area Technical Institute, Mitchell Technical Institute, Southeast Technical Institute, and Western Dakota Technical Institute. Gov. Dennis Daugaard (R) signed legislation to create the board on February 23, 2017. The South Dakota Senate voted 33-0 to pass the bill. The South Dakota House of Representatives voted 65-2 to pass the bill.[18]

The following map shows the locations of South Dakota's four technical institutes:

Recent tobacco tax initiatives in other states

See also: 2016 ballot measures and 2016 ballot measure campaign finance

In 2016, four states featured initiatives seeking to increase tobacco tax rates: California, Colorado, Missouri, and North Dakota. In Missouri, two different initiatives—one an initiated constitutional amendment and one an initiated state statute—sought to increase the tax by different rates and apply the tax in different ways. The initiative in California was approved, and the initiatives in Colorado, Missouri, and North Dakota were defeated. About $156.3 million out of the $1 billion in ballot measure campaign contributions raised in 2016 was for the support or opposition campaigns surrounding tobacco tax initiatives, with opponents outspending supporters. Before 2016, the last time state voters decided a tobacco tax increase was in 2012, when voters in California and Missouri defeated initiatives.

The chart below shows the 2016 initiatives, the proposed rate increase per pack of cigarettes, the support contributions, the opposition contributions, and the outcome of the measures.

Details about the 2016 initiatives

State Measure Rate increase Support $ Opposition $ Outcome
California Proposition 56 $2.00/pack $35.53 M $70.98 M
Approveda
Colorado Amendment 72 $1.75/pack $2.50 M $18.18 M
Defeatedd
Missouri Proposition A $0.23/pack $5.70 M[19] $0.00 M
Defeatedd
Missouri Amendment 3 $0.67/pack $13.75 M $5.70 M[19]
Defeatedd
North Dakota Initiated Measure 4 $1.76/pack $0.027 M $3.93 M
Defeatedd

Path to the ballot

See also: Laws governing the initiative process in South Dakota

The state process

In South Dakota, the number of signatures required to qualify an initiated state statute for the ballot is equal to 5 percent of the votes cast for governor in the previous gubernatorial election. Signatures must be submitted by the first Tuesday of May during a general election year.

The requirements to get an initiated state statute certified for the 2018 ballot:

Once the signatures have been gathered and filed, the secretary of state verifies the signatures using a random sample method.

Details about this initiative

  • Rep. Mark Mickelson (R-13) submitted a proposal for Initiated Measure 25 to the Legislative Research Council (LRC) on June 15, 2017, which then issued comments.[20]
  • The initiative was approved for circulation on August 4, 2017.[1]
  • On November 6, 2017, supporters submitted over 19,025 signatures. At least 13,871 of those signatures needed to be valid in order for the measure to qualify for the 2018 ballot.[21]
  • On February 16, 2018, the South Dakota secretary of state announced that about 83 percent of submitted signatures had been found valid and that this measure, Initiated Measure 25, was certified for the November 2018 ballot.[20][22]

Cost of signature collection:
Sponsors of the measure hired individuals to collect signatures for the petition to qualify this measure for the ballot. A total of $18,750.00 was spent to collect the 13,871 valid signatures required to put this measure before voters, resulting in a total cost per required signature (CPRS) of $1.35.[23]

Initiative proponents stated that between $35,000 and $40,000 was spent on the signature petitions for Initiative Measure 24 and Initiative Measure 25, combined.[23]

Initiated Measure 25 full text


See also

External links

Footnotes

  1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 South Dakota Attorney General, "Attorney General's Statement," August 1, 2017
  2. ↑ Tax Foundation, "South Dakota Lights Up Revenue Uncertainty with Proposed Tobacco Tax Hike," June 23, 2017
  3. ↑ South Dakota Bureau of Finance and Management, "Revenue Forecasts," February 2017
  4. ↑ 4.0 4.1 4.2 4.3 Campaign for Tobacco Free Kids, "State Cigarette Excise Tax Rates & Rankings," accessed December 28, 2017
  5. ↑ 5.0 5.1 5.2 South Dakota Secretary of State, "Tuition4TechStudents," accessed December 27, 2017
  6. ↑ 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 South Dakota Secretary of State, "Campaign Finance Reporting System," accessed February 1, 2019
  7. ↑ Altria, "At-A-Glance," accessed September 6, 2018
  8. ↑ 8.0 8.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
  9. ↑ 9.0 9.1 9.2 Argus Leader, "Tobacco tax for tech schools?" June 19, 2017
  10. ↑ 10.0 10.1 10.2 10.3 Idaho Statesman, "Foes of South Dakota tobacco tax hike initiative mobilize," accessed September 5, 22018
  11. ↑ Brookings Register, "Vote ‘no’ on IM-25," accessed October 13, 2018
  12. ↑ Altria, "At-A-Glance," accessed September 6, 2018
  13. ↑ The Rapid City Journal, "Journal's stand on ballot issues," accessed November 4, 2018
  14. ↑ The Argus Leader, "Vote yes for Randy Seiler, no on Amendment W," accessed November 4, 2018
  15. ↑ South Dakota Secretary of State, "2006 South Dakota Ballot Question Attorney General Explanations," accessed December 28, 2017
  16. ↑ Tax Foundation, "How High Are Cigarette Taxes in Your State?" May 10, 2017
  17. ↑ Campaign for Tobacco Free Kids, "State Cigarette Excise Tax Rates & Rankings," accessed August 1, 2016
  18. ↑ South Dakota Legislature, "Senate Bill 65," accessed December 28, 2017
  19. ↑ 19.0 19.1 The committee that raised this amount both opposed Missouri Amendment 3 and supported Proposition A; this contribution amount was used for both the support and opposition campaigns.
  20. ↑ 20.0 20.1 South Dakota Secretary of State, "Potential 2018 Ballot Questions," accessed June 20, 2017
  21. ↑ US News, "Voters May See Cannabis, Tobacco Tax on South Dakota Ballot," November 6, 2017
  22. ↑ KELO, "Third measure advances to November ballot," February 16, 2018
  23. ↑ 23.0 23.1 Ballotpedia staff writer, "Email correspondence with initiative sponsor," October 2018
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