South Dakota

Half-cent cut to South Dakota sales tax moves past committee – Mitchell Republic

PIERRE, SD – A proposed cut that would lower the state sales tax from 4.5% to 4% is moving forward, filling the second of three “slots” on the House Appropriations Committee reserved for three competing tax cuts ahead of this legislature Meeting.

With a unanimous vote in the House Taxation Committee on Jan. 31, the proposal, sponsored by Republican Rep. Chris Karr of Sioux Falls, is on track to come under appropriator scrutiny. It carries 17 sponsors between both chambers.

Lawmakers have said those proposals will wait until projected revenues begin to crystallize in mid-February, when appropriators will begin to consider how the food tax, sales tax and property tax proposals fit into the larger picture of government finances.

“The debate will continue, and [appropriators] will be able to tell us what we can and can’t afford once that revenue is in place,” said Rep. Liz May, a Kyle Republican.

In terms of cost to the state, the $170 million price tag associated with the sales tax far exceeds the $100 million food tax cut. The owner-occupied property tax cut, which will be heard by the tax committee en route to appropriators on Thursday, comes with a price tag of somewhere in the $70 million to $80 million range, with a final tax memo expected from lawmakers shortly.

“I think we probably understand that we want to take this to House Appropriations and have them analyze this proposal along with others,” said Greg Jamison, a Republican congressman from Sioux Falls, a member of the House Taxation Committee, before asking a question to Karr. “Why this approach versus the grocery store approach we’ve heard before?”

One reason Karr pointed to when arguing that simply changing the state sales tax is preferable to the food tax is that should revenue fall to the point that the state suffers financially, raising a tax slightly might be easier than the reintroduction of a tax that has been completely cut.

“I think times are good, and when times are good and we have excess dollars that I think will be sustainable for a while, we need to put some mechanism in place to put those dollars back into the Bringing hands of men.” Karr said. “I believe [the sales tax] is a more responsible way of doing this if we ever need to increase it.”

May also noted that as a business owner, simply changing the sales tax rate would be easier to implement than a carve-out for specific groceries.

Karr, the bill’s sole supporter, was countered by an opponent: Derek Johnson, a public economist with the Bureau of Finance and Management.

As with almost any proposed appropriation or tax cut not included in the governor’s budget proposal, various officials have used their opposing statements to simply explain the cost and demand that the proposal be passed on to the appropriators, not the Word.

“I think we know at the end of the day that we can’t afford to make all these proposals without considering some pretty significant budget cuts,” Johnson said. For this reason, we would like to ask you to forward this bill to the House Budget Committee as well.”

In the committee minutes, Karr included a series of estimates outlining what a smaller cut would cost: a cut of three-tenths, for example, would be almost exactly the cost of the grocery store cut. While he advocated a full cut, he left any future discussion of how much the sales tax should be cut to the broader legislature.

“Not everyone may come to the same conclusion that we can afford to provide $170 million in tax breaks, and maybe the consensus will be that we can only afford $125 million or $100 million,” Karr said.

Jason harward is a

Report for America

Corps reporter who writes about state politics in South Dakota. Contact him at



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