States have struggled to keep up the same revenue growth as they experienced before the recession. One big reason is that their earnings from sales taxes are declining. That's because these days, consumers are spending far more on services -- most of which aren’t taxed -- than goods, which are.
To remedy the situation, lawmakers have tried and had varying degrees of success expanding the sales tax to services. Massachusetts passed a tax on the cloud and quickly repealed it after the tech industry complained. Pennsylvania enacted the so-called "Netflix tax" on streaming video services. Washington, D.C., added a long list of services to be taxed: yoga, tanning and bowling, to name a few.
Annual interest rates on payday loans in South Dakota are among the highest in the nation -- a whopping 652 percent on average. Yet the business is booming there with nearly 100 stores across the sparsely populated state.
Critics of the industry say lenders prey upon low-income borrowers who are unable to access financing from mainstream banks. These borrowers, they claim, easily get trapped into a cycle of debt. Payday lenders, however, argue that they fill a critical hole in the economy by allowing people with poor credit to get emergency loans.
South Dakota voters have the chance to regulate the industry in November. But two seemingly identical proposals that would have vastly different outcomes are complicating the effort to rein in high interest rate