A federal balanced budget amendment sounds so reasonable – Why isn’t it?

Added January 24th, 2015 by

A Federal Balanced Budget Amendment doesn’t make fiscal sense for South Dakota

At risk:  Federal Budget Spending is $8.2 billion in South Dakota

Fiscally responsible federal budgeting can and should be achieved through prudently balanced taxation and spending policies without a Constitutional Amendment requiring a balanced budget.  A Constitutional Amendments takes away options the American people may need to meet unknown fiscal challenges of the future.

A balanced budget amendment would hurt our economy, making recessions longer, deeper and more damaging by requiring deeper budget cuts or tax increases when the economy weakens – which would weaken the economy even more.

SD gets back 1.5 for ever dollar we pay inWhen the economy is struggling and people are without jobs, expenditures for food stamps and unemployment insurance rise, while tax revenue declines.  As a result, a balanced budget requirement would require deeper budget cuts, substantial tax increases, or both in recessions, taking away vital help from South Dakota people and our state and local governments facing hard times.

What is paid for with the $8.2 billion of Federal Budget Spending in South Dakota

$1.7 billion – Federal dollars for South Dakota state and local revenue

Federal dollars provide over 40% of the South Dakota government revenue. These dollars pay for roads ($420 million), education ($273 million), agriculture and natural resources ($47.8 million), health and hospitals ($97 million) and housing and community development ($37.4).

Chart 1*

Chart 1*

 

$4.5 billion – direct benefits from federal government paid to individuals in South Dakota

Most of this money is Social Security and Medicare benefits for the elderly or disabled, but it also includes educational assistance like Pell Grants, federal unemployment benefits and food stamps.

Chart 2*

Chart 2*

$0.6 billion – Federal contracts in South Dakota

The United States pays venders to perform contracts in South Dakota (example – supplying the Military at Ellsworth Air Force Base in Rapid City).   Agency-wise, the biggest spender in South Dakota was the Department of Defense which oversaw 60% of federal contract money in the state.  Other top contracting agencies were the Departments of Veterans Affairs, Department of Agriculture, Department of the Interior and Department of Health and Human Services.

Chart 3*

Chart 3*

$1.4 billion – Federal employees in South Dakota

Almost 20,000 people in South Dakota work for the Federal Government, with their compensation making up about 7% of all wages and benefits earned by people who work in the state.

Chart 4*

Chart 4*

Who pays South Dakota’s $5.6 billion in contributions to the Federal Budget?SD contributinos to the Federal Budget

$5.2 billion—Individual and payroll taxes

$0.213 billion—Business taxes

$0.034 billion—Excise taxes

$0.017 billion—Estate taxes

$0.017 billion—Gift

Almost all (95%) of South Dakota contributions to the federal budget are from Individual income tax, self-employment tax or payroll taxes.

Business taxes (corporations) pay less than 4% of the total.  Excise taxes, estates taxes and gifts combined represent only 1.2% of contributions.

South Dakota per-person federal tax contributions are lower than the national average.

Chart 6*

Chart 6*

The average taxpayer in South Dakota paid $9,412 in federal income taxes in 2013.  That’s $2,303 less than the national average.  The following “receipt” helps taxpayers envision where their taxes were spent (both back at home in South Dakota and at the national level for items like defense, international affairs, science and interest on the debt).

Chart 7*

Chart 7*

Summary

Fiscally responsible federal budgeting can and should be achieved through prudently balanced taxation and spending policies without a constitutional amendment requiring a balanced budget.

A Constitutional Amendments takes away options the American people may need to meet unknown fiscal challenges of the future.

A balanced budget requirement would require deeper budget cuts, substantial tax increases, or both in recessions, taking away vital help from South Dakota people and our state and local governments facing hard times while making the economic downturn more serve.

Our opportunity as South Dakota citizens to best solve the challenge of an underfunded federal government is to advocate for policies and elect representatives who are willing to either raise taxes, cut expenditures, or a combination of both, on an ongoing basis to meet the needs of Americans, in both the long and short term.

 

 

 

* Charts and analysis from https://www.nationalpriorities.org/smart/south-dakota/ and https://www.nationalpriorities.org/interactive-data/taxday/average/2013/sd/receipt/

 

 

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