News, dismal news:
South Dakota's food tax refund program reaches only 264 homes in our whole state! [FY 2012] The program is returning to the people less than 1/10 of 1% of what South Dakota households pay in food tax. [FY 2012] It goes without saying that there is a great deal more need than that!

• Rebate-type programs for low-income people are inherently ineffective. This was already known from years of South Dakota's tax refund program for low-income senior citizens and citizens with disabilities.

• No matter how simple the paperwork seems, low-income people are missed for a multitude of reasons. They (and now also middle-income families) have many stresses and time-consuming issues. They lack financial advisors keeping them signed up for available benefits. Many don't find out, or think it is not for them. Often their income fluctuates. Some are embarrassed to seek help, even help for which they rightly qualify. Many are ill, mentally incapable, emotionally distraught, or simply dealing with the crises that come more often the lower the income. Juggling several jobs and children's needs, while trying to manage on too little income, can be overwhelming enough to miss out on much of what life has to offer.

• WHO ARE MISSED BY THE PROGRAM? At the time of the 2000 Census, South Dakota had about 94,000 low-income households. Now all except 264 are missed by the program. Even the households with food stamps pay tax on the food they buy with cash when food stamps run out. Some have only a small amount of food stamps, like $25 a month, and buy most of their food with cash, paying tax on every item they buy with cash.

So far, there is no way to accomplish effective food tax relief -- unless it is automatic. What would be automatic?: Cutting the tax itself. The benefit would miss no one. Even cutting the 6% food tax down to 5.5% would provide more benefit to low-income people, as a group, than the refund program does.

(updated 12/21/11)

How the low-income food tax refund program works

Eligibility
Those with incomes between 130% and 150% of poverty line are eligible, an estimate of over 12,000 households, out of about 94,000 low-income families. [estimated from the 2,000 census. There would be more low-income families now.]

Procedure
Note: Starting July 1, 2011, because of action by the 2011 legislature, the state switched the food tax refunds to annual checks rather than EBT cards (same as food stamp cards) with credit applied quarterly .

Pay the tax. Continue to pay tax on food purchases.

Apply for the program during the months of enrollment in the fall, providing information on household income and number of people in the household.

Receive a check once a year. Use the money as needed.

Problems:
1. The program reaches only a tiny handful of struggling families, only 264 for all of FY2012, out of the tens of thousands who rightfully should receive refunds.

2. Of course, families will appreciate the money, but it will undoubtedly be spent in short order and will not make families better able to afford their food while they are paying the tax all during the year.

3. If families have enrolled in food stamps (now called SNAP) during the year and are enrolled at the time the refunds go out, they will receive no refund at all, no matter how many months they paid tax on their food.

4. No one who is receiving food stamps gets a refund check, even though most people with food stamps also pay for food with cash, paying the tax every time.

Amount of the credit: To figure the credit, the state assumes families buy an amount of food tax with a cost equal to the USDA's "Thrifty food Plan" (the most meager of the four USDA levels of eating).

updated 12/21/11, Computations based on US Census poverty data, and SD Dept. of Social Services.