Noem’s Grocery Tax Repeal Bill Fails; House Committee Reduces Overall Sale Tax Rate To 4.2%


       The South Dakota House Appropriations Committee has backed the GOP caucus plan to provide tax relief this year by cutting the overall sales tax rate and rejected Gov Kristi Noem’s plan to eliminate the sales tax on groceries.

     The panel voted 8-1 Tuesday morning to advance the sales tax cut to the House floor, then by the same margin tabled the grocery tax repeal and a bill exempting the first $100,000 of an owner-occupied single-family home from property taxes.

      Dropping the sales tax rate by 3-10ths of a penny to 4.2% and eliminating the grocery tax would both reduce sales tax revenue by an estimated $102-to-104-million dollars a year. 

      After the votes, Noem told reporters the committee made the wrong decision and that she would keep working on the grocery tax – which she made a centerpiece for her re-election campaign last year after opposing a Democrat-led bill to repeal the tax.

     The House Republican Caucus voted over the weekend for the general sales tax cut, with House Majority Leader Will Mortenson saying they felt a single exemption for groceries was too narrow of an issue to tackle in a tax cut.

     Mortenson said the caucus decided it was better to keep a broad sales tax base and cut the rates on not just on food but also on “fireworks and fencing supplies and everything.”      

    The South Dakota Retailers Association testified cutting the overall rate “makes a lot of sense” on a long-term basis while the South Dakota Municipal League opposed Noem’s plan because it would endanger city sales taxes on food, destabilizing revenue.

     Noem testified for her plan before the vote, telling the committee “it’s about time we represent the taxpayer.” She said her plan would help people across all socioeconomic levels and that the state’s current near-record surplus means it can be done.

     The governor later told reporters the lawmakers “think they know better than the people in this state” on taxes – and she disagrees and won’t give up the fight. Her plan can still be resurrected by a legislative maneuver called a smoke-out, a 2.3rds vote by the full House requiring the committee to send the bill to the floor.