The South Dakota House Taxation Committee has passed a bill (Tues/Feb. 17) that would eliminate school-related property taxes on owner-occupied single-family homes and replace that revenue with a two-step increase in the state sales tax.
House Bill 1308 would set the general education and special education mill levies to zero for owner-occupied properties. To replace that revenue, the state sales tax would rise from 4.2% to 4.7% on July 1, 2026, then to 5.0 percent on July 1, 2027. The change would only apply to school levies; county and municipal property taxes would still apply.
Rep. Tim Czmowski from Sioux Falls, the bill’s prime sponsor, told committee members the proposal aims to deliver homeowner relief while building a more stable funding stream for what legislators call the “big three” — K-12 public education, state employee wages and community service providers. He said the bill is designed so a share of new sales tax revenue would support ongoing pay increases for school employees, state workers and community service providers.
Derek Johnson, representing the state Bureau of Finance and Management, testified in opposition. He said property tax growth is not uniform across the state and questioned whether HB 1308’s stated intent language would be enforceable.
House Taxation Committee Vice Chair Rep. John Hughes of Sioux Falls said he typically opposes tax increases, but supported sending HB 1308 to the House floor for broader debate.
The committee advanced the measure on a 10-2 vote.
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