PIERRE, S.D. (AP) — South Dakota Republican Gov. Kristi Noem vetoed a proposal Thursday that would have allowed cities to hike taxes on temporary lodging to help fund events and attractions to draw tourists.
Proponents argued the hike would benefit such things as sports and livestock shows, and that out-of-state tourists would shoulder most of the costs. But Noem and other opponents said the potential hikes could also harm the state’s rural residents who travel to cities for doctor appointments, education or recreation.
Noem argued that the state’s tourism industry is in good shape and cautioned the taxes could be manipulated to go straight into the pockets of private businesses.
Republican Sen. Tim Reed, who sponsored the bill that narrowly won support in the Senate last week after winning by a large margin in the House, said hotels and campgrounds supported increasing rates because it would help cities thrive. Other supporters pointed out that neighboring states have created business improvement districts and tax hikes would help future business recover from a dearth in tourism during the COVID-19 pandemic.
“It would allow local government, local lodging industry and local business improvement districts to determine if the current cap should be adjusted,” Reed said.
Although proponents said many other states have enacted this kind of tax structure, Noem said that shouldn’t influence South Dakota’s decisions.
“When South Dakota competes on tax rates, we should compete to be lower — not higher,” she said in a statement.
Noem’s veto comes a week and a half after lawmakers rejected her proposal to end the state’s tax on groceries. The Legislature can override the veto if two-thirds of all members vote to do so.
