MARCH 7, 2023:
(South Dakota Broadcasters Association)– Without debate, the South Dakota House this morning (March 7, 2023) rejected the Senate’s version of a bill to revive the repeal of the state’s 4.5% sales tax on food.
The House rejected HB 1094– to both not concur and not appoint a conference committee– by a vote of 55 to 14.
The remaining sales tax cut before the legislature is HB 1137. It left the House as a reduction in the state’s comprehensive sales tax from 4.5% to 4.2%. The Senate amended it to 4.3%. That changed the sales tax savings from $104 million to $69 million. It would also sunset (end) on June 30, 2025, unless a future legislature extends the cut, expands it or ends it.
Taking the 4.5% sales tax off groceries was a significant plank in Republican Gov. Kristi Noem’s 2022 election campaign.
Whether HB 1137 comes up on today’s House calendar depends on behind-the-scenes negotiations. The House has adjourned until 11 a.m. today; the Senate goes into session at 10 a.m.
The main run of the legislative session goes through Thursday. Veto Day is set for March 27.
MARCH 6, 2023, UPDATE:
(South Dakota Broadcasters Association)– The state Senate passed the grocery sales tax reduction by a single vote this afternoon (March 6, 2023).
HB 1094 was “hog housed” (had its original contents removed) and replaced with repealing the sales tax on groceries. The vote was 18 to 17.
Supporters say removing the sales tax on food would save taxpayers about $104 million.
Earlier today, the Senate also passed a general sales tax reduction from 4.5% to 4.3%. Supporters of that measure say it would provide $69 million in tax relief over nearly all goods and services.
Bill supporter, Republican John Wiik from Big Stone City, said passing the measure would help legislators keep their campaign promises.
“Maybe you campaigned alongside the Governor and saw the reaction when people heard it,” he said. “It is permanent tax relief. There are a million reasons not to pass the bill. There are 900,000 reasons to pass it–the 900,000 people who live in South Dakota.”
Republican President Pro Tem, Sen. Lee Schoenbeck from Watertown, said his constituents weren’t asking for a reduction in the sales tax, but in property taxes.
“My constituents think this sets us up for an income tax,” he said. “It was universal.”
Another opponent, Republican Sen. Jean Hunhoff from Yankton, said tourists buy a lot of food.
“We’ll lose that revenue,” the Co-Chair of the Joint Appropriations Committee said. “If people need food assistance, maybe we look at SNAP.”
Native American legislators expressed dismay earlier in the session when the original bill was introduced. They said neither the Governor nor legislators consulted the tribal nations about its impact on them. They said they would lose millions of dollars under the state sales tax compact if the sales tax were removed on food.
The critical vote for the measure was Democratic Sen. Shawn Bordeaux from Mission. “The tribes will be made whole on this.” He said a letter from Republican Gov. Kristi Noem to the tribes that the state would hold the tribes harmless was “made in good faith.”
The Senate has now passed two tax cuts in one day.
Earlier in the session, the House rejected ending the sales tax on food but supported reducing the overall state sales tax from 4.5% to 4.2%. The Senate passed a version that makes the rate 4.3%
There are three days left in the main run of the legislature this week, followed by a one-day veto session on March 27.
MARCH 6, 2023:
(South Dakota Broadcasters Association)- The South Dakota Senate passed an amended HB 1137 that would reduce the reduction in the overall sales tax from 4.5% to 4.3%. As passed in the House, the bill was a cut from 4.5% to 4.2%.
Instead of a $100 million-plus tax cut, the bill would be a $69 million reduction in sales taxes. The measure passed the Senate 33 to 2.
But even a prime supporter doesn’t think this will be the final form for a tax cut.
“We know that in the four days, we’ll have a lot of discussions,” said Republican Majority Leader Casey Crabtree from Madison. “This isn’t your last chance at that. We’ll come up with something great for the citizens of South Dakota.”
An attempt to remove the “sunset” provision of June 30, 2025, failed on a voice vote. Supporters of that attempt said the termination date was not good tax policy because it was inconsistent and irresponsible. In its current form, HB 1137 would end the tax cut on that date unless the legislature extends or removes it.
“We need to consider what the economics are in the future, and we don’t know,” said Republican Co-Chair of the Joint Appropriations Committee,Sen. Jean Hunhoff from Yankton. “This gives us two years to see if the economy is going to flourish or not.” She also mentioned the coming Medicaid expansion, prison funding and teacher and state employee raises as unknown for the future.
Because of the Senate’s changes to the bill, unless the House concurs, it is likely to go to a conference committee. Once there, any number of scenarios could emerge.
Republican Gov. Kristi Noem is pushing to end the 4.5% sales tax on groceries. The Republican caucus has been favoring the approach in HB 1137. Other legislators would like to see property tax relief.
FEBRUARY 27, 2023:
(South Dakota Broadcasters Association)– A South Dakota Senate committee favorably recommends reducing the state’s sales tax to the Senate Appropriations Committee from 4.5 to 4.2%–with a catch. On a 6 to 0 vote, the Senate Taxation Committee added a sunset 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.
HB 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,” Rep. Karr said. “I think we could reduce it all the way (to 4.0%).”
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% 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.
FEBRUARY 23, 2023:
(South Dakota Broadcasters Association)– The South Dakota House overwhelmingly passed the largest tax cut in the state’s history yesterday (Feb. 22, 2023).
HB 1137 reduces the state sales and use tax from 4.5% to 4.2%. It passed on a 66 to 3 vote. The measure could save South Dakotans an average of $116 per person in sales tax.
Supporters say it would be a $104 million tax cut. They also say because of the strength of the state’s economy and prudent budgeting, the state will be able to pay for its ongoing obligations without issue.
One opponent said it was not a good idea to pass tax cut legislation before all the appropriation bills have been considered, and the overall budget picture needs to be clarified.
The bill now goes to a Senate committee.
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