Noem threatens to pull budget support if lawmakers don’t pass her food-tax repeal

SIOUX FALLS — A final showdown is looming between Gov. Kristi Noem and the Legislature over tax cuts. 

During an unrelated bill-signing ceremony Wednesday in Sioux Falls, Noem responded to questions from the media and suggested she would not approve a state budget that does not include her proposed repeal of the states sales tax on food. 

“I don’t think anybody should ever take for granted that I will just automatically sign a budget,” Noem said. “I think it’s silly that they think in two weeks I have got to sign that budget if I don’t like it.”

Noem made similar statements in a Tuesday news release and video. She did not use the word “veto” in the release or during her statements to the media Wednesday. Later Wednesday, South Dakota Searchlight asked Noem’s spokesman, Ian Fury, if Noem is threatening a veto.

“Her words speak plenty well for themselves,” Fury replied.

If the legislature pursues a temporary tax cut and instead embraces a spending spree, it will hurt our families and our businesses.

They should pass the tax cut the people want: eliminating the sales tax on groceries. pic.twitter.com/6QlgT5pQzk

— Kristi Noem (@KristiNoem) February 28, 2023

The main run of this year’s legislative session at the Capitol in Pierre ends March 9. If Noem issues any vetoes, legislators will return March 27 to consider overriding them with a two-thirds majority vote.

Noem promised to repeal the sales tax on food during her fall reelection campaign, arguing the state has a budget surplus and the tax hurts working-class families, especially during high inflation. 

Some legislators view the state’s financial situation more conservatively and oppose carving out an exemption for one category of purchases. Instead of supporting Noem’s bill, legislators have brought a rival bill close to final adoption. That bill would cut the state’s sales tax across the board – not just on food – from 4.5% to 4.2%. A sunset provision in the bill would move the tax back up to 4.5% after two years unless legislators take action to extend it. 

A Senate committee voted 7-1 on Wednesday to send the bill to the full Senate. It’s already passed the House, but because it’s been amended since then, representatives would have to consider those changes if the Senate approves the bill.

Estimates say both bills would save taxpayers – and cost the state budget – upwards of $100 million during the first year of implementation.

Noem criticized legislators for considering only a temporary tax cut, and she argued that repealing the food tax would provide more targeted relief to South Dakotans. 

“We have historic revenues right now and we’ve permanently grown our economy,” Noem said. “The taxpayers deserve to keep some of their own money in their own pockets.” 

Noem is also cautioning legislators that a proposed ballot question for the 2024 general election that would eliminate the food sales tax will likely pass.

“If they choose a different tax cut this year, they better make sure they can afford to do the repeal on the sales tax on groceries in a couple of years, too, because they’re going to have to do both,” Noem said.