SD lawmakers favor sales tax cut, but with a catch

If approved, sales tax reduction would expire in 2025
(MGN Online)
Published: Feb. 27, 2023 at 12:01 PM CST
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PIERRE, S.D. (SDBA) – A South Dakota Senate committee favorably recommends reducing the state’s sales tax to the Senate Appropriations Committee from 4.5 to 4.2 percent --with a catch.

On a 6 to 0 vote, the Senate Taxation Committee sends the amended House Bill 1137 to eliminate the tax decrease on June 30, 2025.

Amendment supporters said this was for a couple of reasons. First, they say they think an initiated measure eliminating the state sales tax on groceries will pass in 2024. Second, regardless if the initiated measure passes, they want to ensure the tax reduction on the broad group of goods and services is sustainable.

Amendment sponsors said they brought the measure because of concerns by Senate Republican leadership.

House Bill 1137′s sponsor, Republican Rep. Chris Karr from Sioux Falls, did not support the amendment in his testimony.

“I was consulted, but I wouldn’t consider it (the amendment) friendly,” Karr said. “I think we could reduce it all the way (to 4.0 percent).”

Some of Rep. Karr’s Senate colleagues had a different point of view.

“Do we trust future legislators to do the right thing?” Republican Sen. Al Novstrup from Aberdeen asked. “Yes, but this (the amendment) also appears to be good tax policy.”

Republican Sen. Joshua Klumb of Mitchell said the amendment is prudent.

“If the sales tax on food passes, we can’t afford that,” Klumb said. “If we go into a recession, it’s the same situation. If things look good, future legislators can remove the sunset.”

Supporters say reducing .3 percent in the overall state sales tax would save taxpayers about $104 million annually.

The measure now goes to the Senate Appropriation Committee with a do-pass recommendation.