PIERRE, S.D. (SDBA) — A South Dakota House committee has taken the first step in making the 0.3% reduction passed by the legislature last session permanent.
On an 11 to 1 vote, the House Taxation Committee passed HB 1001. The bill, introduced by Republican Rep. Chris Karr from Sioux Falls, removes the June 30, 2027 sunset provision on the “tax holiday.”
The reduction decreased the state sales tax from 4.5% to 4.2%.
Karr testified that the predicted decrease of $104 million has yet to occur, with only about $16 million reduction during the first six months of the 2024 fiscal year.
“We have foreseeable economic growth,” Karr said. “South Dakota’s economy is doing well compared to the nation, region, and prior years. It’s time to make this permanent.”
The Noem Administration’s Jim Terwilliger, with the Bureau of Finance and Management, said Gov. Kristi Noem supports making the cut permanent.
Nathan Sanderson, executive director of the South Dakota Retailers Association, spoke against the sunset repeal.
“This is a result of not new South Dakotans coming into the state but federal money,” Sanderson said. “Also inflation. This century’s three highest years of inflation have been back to back to back.”
Sanderson also said that there remains considerable unspent federal COVID-19 money.
“Let’s pull back,” Sanderson said. “Let’s keep in mind why we’re seeing revenue increases.”
Sanderson and other opponents also warned of a ballot measure removing the sales tax on food as a reason to keep the 2027 sunset in place.
During committee discussion, Republican Rep. Sue Peterson from Sioux Falls said there were good fiscal reasons to make the tax cut permanent. She also mentioned that when the legislature raised the sales tax from 4 to 4.5% some years back, there was the implied promise that the rate would go back down once remote sales were taxed.
“We probably have remote sales that cover this cut,” she said.
The measure now goes to the House of Representatives for consideration.
