Sales tax cut takes another step forward -- with a catch
A Senate committee added a two-year sunset to the plan approved by the House of Represenatives.
PIERRE, S.D. — The House-approved $100 million sales tax cut, moving the overall rate from 4.5% to 4.2%, is on its way to the budget committee in the Senate, passing out of the Senate Taxation committee by a unanimous vote on Feb. 27.
But there’s a catch.
An amendment, proposed by Sen. Jim Stalzer, of Sioux Falls, the committee’s chair, puts a deadline on the cut: June 30, 2025, two years after the cut would take effect.
“It would give some people a little more confidence going forward by putting this on, which is why I was asked to entertain this by leadership,” Stalzer said during the hearing.
The reason for the change stems from a bit of legislative minutiae.
During the 2025 legislative session, if state revenues are strong and lawmakers feel as though they’re able to continue funding state obligations with a 4.2% rate, removing the clause to sunset the cut that year takes a simple majority.
However, on the flip side, if this amendment were not attached to the bill, raising the tax rate to fund state obligations that year would require two-thirds of lawmakers in both chambers to enact, a much more difficult lift.
The 2025 date for reconsideration of the tax cut also comes a few months after the 2024 election, when voters could potentially consider a cut to the grocery tax.
Though the vote and discussion appeared to indicate Senate leadership was in favor of proceeding with caution on the issue, Stalzer said the Senate Appropriations Committee, the next stop for the legislation, could decide to throw out the amendment and proceed the change to the Senate floor without a sunset date.
Rep. Chris Karr, of Sioux Falls, the main proponent of the sales tax cut in the House, said he opposed the amendment but understood that compromises such as this one are a part of any legislative process.
In their support for the bill, several seasoned lawmakers on the tax committee recalled voting for the 2016 sales tax increase because of assurances that the tax rate would come down as the state began collecting taxes from online sales.
“I'm not a super huge fan of the amendment but will go along with it to keep this discussion active because I know there's some angst in the Senate over this thing,” Sen. Herman Otten, of Tea, said. “I believe it holds me to my intended vote five years ago [to raise the sales tax contingent upon a future lowering of the rate], and what I told my constituents.”
Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or firstname.lastname@example.org.