Like Republican legislators, citizens want to cut taxes
Reps. Mike Derby, R-Rapid City, left, and Chris Karr, R-Sioux Falls, shake hands after a $104 million tax cut passed the House unanimously on March 9, 2023, at the Capitol in Pierre. (Makenzie Huber, South Dakota Searchlight)
South Dakota lawmakers went through a bit of a tax cut frenzy in the last legislative session before finally settling on a reduction of the state sales tax. A recent poll shows that citizens favor getting into the tax cut game as well.
A poll of registered voters sponsored by South Dakota News Watch and the Chiesman Center for Democracy showed that 60.6% of respondents favored cutting the state sales tax on groceries. These results aren’t quite as robust as the poll numbers offered by Gov. Kristi Noem during the last legislative session when she was championing a similar tax cut. Her polling found 75% of respondents in favor of cutting the tax, which would cost the state an estimated $120 million in revenue.
With state tax revenue running ahead of projections and federal pandemic money piling up, tax cut plans were abundant during the last legislative session. In addition to the governor’s plan, there was a convoluted property tax rebate bill and a plan to drop the state sales tax from 4.5% to 4%. Lawmakers ultimately agreed on a state sales tax cut from 4.5% to 4.2% that would sunset on June 30, 2027.
It’s only a matter of weeks until the next legislative session and a matter of months until the 2024 election, when there is sure to be an initiated measure on the ballot seeking to cut the state sales tax on groceries. Given the polls showing the popularity of that particular sales tax cut, it will be interesting to see how the governor and lawmakers approach taxes in the coming session and the next election.
For her part, the governor is kinda, sorta in favor of cutting the state sales tax on groceries. In a News Watch story about the poll numbers, Noem’s spokesman said she agreed with consumers that the tax should be cut, and that she would work with the Legislature if that sort of bill was introduced in the coming session. Notice that this falls short of being an endorsement of the ballot initiative.
Her stand is something of a change from a July News Watch story in which a different spokesman said the governor didn’t favor the initiated measure. That was because, according to the attorney general’s ballot explanation, its passage would jeopardize a federal cigarette settlement worth $20 million per year, as well as throw into disarray the streamlined sales tax agreement that allows South Dakota to collect sales taxes on internet purchases.
Noem’s support for the tax cut, a traditional talking point of the Democratic Party, has always been a bit of a mystery. She continues to embrace the tax cut she first touted during her reelection campaign. Prior to that, she adhered to the Republican Party line that said the state couldn’t afford such a tax cut, and that it was a gateway drug that would lead to a state income tax.
Instead of preparing for the likely voter endorsement of the initiative that cuts the sales tax on groceries, Rep. Chris Karr, a Republican from Sioux Falls, has filed a bill that would take off the sunset clause and make the 4.2% state sales tax permanent. Karr told the Dakota Scout that with continuing tax revenue surpluses there would be no need for the sunset clause.
The sales tax cut that Karr likes so much resembles the stealth bomber. With a savings of just 30 cents on a $100 purchase, it’s almost undetectable for consumers. Yet it delivers a hefty payload that cuts an estimated $104 million from state revenues.
While Karr was preparing a bill to make his tax cut permanent, House Majority Leader Will Mortenson issued a warning about any attempt by the Legislature to enact a sales tax cut on groceries. The Republican from Pierre said it would be “irresponsible” for the Legislature to consider a sales tax cut on food without making corresponding cuts in the state budget.
It’s easy to assume Mortenson was using his stern voice when he told News Watch, “Unless you support less pay for teachers, closing more nursing homes and less public safety, I don’t think you can responsibly talk about cutting something like the food sales tax without a plan to cut spending also.”
Perhaps Mortenson would apply the same kind of budget restrictions to the ballot initiative, if it is endorsed by voters. During the last session’s tax cut frenzy, it’s hard to recall a similarly grim warning from legislative leaders concerning the need for budget cuts as lawmakers embraced a stealth tax cut that was able to leave a $104 million hole in the budget.
At this point, lawmakers may want to consider their options:
They could use the upcoming legislative session to plan for the likely voter endorsement of the initiated measure by dumping the previous sales tax cut and writing a bill designed to cut the state sales tax on groceries while also protecting the federal cigarette settlement and the collection of sales taxes on internet purchases.
Or, they could invest in an expensive political ad campaign designed to convince South Dakota consumers that they don’t really want to cut the state sales tax on food after all.
Or, they can pass Karr’s bill to make that sales tax cut permanent and cross their fingers while they hope that citizens don’t endorse the initiated measure and leave a blank spot in the budget where there used to be $120 million worth of revenue.
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