South Dakota lawmakers are narrowing in on a plan to reduce the overall sales tax rate. But the exact form of that plan is still undecided.
Two tax-cut proposal are still alive. Both reduce the overall sales tax rate.
One version favored by House lawmakers cuts it by 0.3 percent, resulting in an approximately $104 million cut. The other, backed by Senate Republicans, cuts the sales tax by by 0.2 percent and sunsets after two years. That proposal would cut around $69 million.
Until Tuesday, the Senate position on a tax cut was unclear. Now, Senate Majority Leader Casey Crabtree said Senate Republicans are working on a tax cut that’s best for everybody.
“We’re on the path of delivering that in the sales tax. There’s details to work out, yet, but that’s definitely the path we’re taking,” Crabtree said. “Percentages are something that everybody is still discussing and whether that sunset is included or not. Those things are just ongoing and fluid discussions at this point.”
Tuesday morning, House lawmakers defeated a hoghoused bill eliminating the sales tax on groceries. That came less than 24 hours the Senate revived the Gov. Kristi Noem-backed proposal.
Food tax debate in the #sdleg house didn’t last long. pic.twitter.com/RwKjbKY03h
— Lee Strubinger (@LeeSDPB) March 7, 2023
Shortly afterwards, a conference committee rejected a separate bill providing $425 tax credits on owner-occupied homes.
While state lawmakers are debating the varying degrees and permanency of a sales tax cut, they’re also negotiating funding for what’s known as the Big Three—which is education, community service providers and salaries for state employees. Funding increases for those are typically tied together.
“We wouldn’t do any of these tax cuts if we felt like we couldn’t also fund the core obligations of state government,” said House Majority Leader Will Mortenson.
Since the middle of February, House lawmakers have been clear in what proposal they’d like to see—a permanent sales tax reduction from 4.5 percent down to 4.2 percent.
Mortenson said negotiations surrounding the Big Three could also get wrapped up in the tax cut debate.
“If we’re going to be talking about things like sunsets, though, we might be talking about a larger tax cut," Mortenson said. “The only thing that would affect the big three is if we’re talking about increasing how large the tax cut is if there’s a sunset attached.”
Lawmakers have until Thursday to determine which tax cut plan to back and craft the fit the final pieces of the state budget.
This is a developing story. Check back for updates.
