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Hear the Partridge Singing: Karr, Haugaard Want to Cut Sales Tax from 4.5% to 4%

Also eying our mondo remote sales tax receipts is Representative Chris Karr, who says it’s time to fulfill the Partridge Promise of 2016 and use our new revenue stream from online sales to cover the cost of the teacher pay increases we enacted under Governor Dennis Daugaard.

House Bill 1327 would cut the state sales tax from 4.5% to 4.0%. Given the $28.682 billion in taxable sales in calendar year 2021, removing that half percentage point would deprive the general fund of over $143 million. But given that taxable sales increased 13.66% last year, a 4% tax on 2021 taxable sales would still bring in $11.7 million more in state sales tax than 4.5% did on 2020 sales. Representative Karr can thus make a fair argument that South Dakota has grown its way out of the need for that extra half-penny of regressive sales tax.

Helping that fiscal growth is the Jackley Wayfair tax we started collecting in 2018. As I mentioned a few moments ago, remote sellers remitted over $105 million to South Dakota in 2021. That’s more than the five $20-million increments that the 2016 Partridge Amendment promised would trigger a rollback of those five extra tenths of a percentage point that we added to the state sales tax in 2016 to increase teacher pay.

Karr’s HB 1327 copies section by section House Bill 1247, a 4% sales tax bill filed earlier by Representative Steven Haugaard (R-10/Sioux Falls). The only difference between the two measures is that Karr’s bill strikes the Partridge Amendment from statute, while Haugaard’s bill leaves it in place. That difference is perhaps practically immaterial, as the Legislature has never been able to figure out how to implement that compromise.

HB 1327 has been assigned to Joint Appropriations and awaits a hearing. HB 1247 awaits a committee assignment. But legislators are hearing the Partridge Amendment singing its song. Perhaps the walls around their inaction on this measure will finally crumble….

3 Comments

  1. Cathy B 2022-02-08

    It’s good that legislators noticed the revenue is now available for a sales tax cut. But the first cut should be on food. A little history: Now and over the past 18 years, South Dakotans pay more for every breakfast, lunch and dinner in higher food tax, in order for the state to get revenue by taxing online sales. What should not be forgotten is that back in 2003 South Dakota needed to make changes in the sales tax to conform in certain ways to other states so the Supreme Court would allow our state to tax online sales. The new rules ended the previous 1% limit for cities’ tax on food. Knowing city rates on food would rise to 2%, advocates asked legislators to lower the state’s rate on food to compensate. Legislators said to wait until the state gets the expected new revenue. So what happened? Before long, food tax doubled, 1% to 2%, in most cities. Worse, some cities had not been taxing food at all. They were forced to start taxing groceries: Rapid City, Mitchell, Spearfish, Pierre, New Underwood, and Wentworth. In these, city food tax went from 0 to 2%. Now, in 2022, cities are still allowed only one tax rate. So food tax cuts need to come in the state’s portion of sales tax. HB1327 and HB1427 could be amended to take some tax off food before cutting the general rate. Or, why not just take the whole state 4.5% off food, while we’re at it? I am confident a majority of the public would prefer whole percents off food to partial percents off the general rate.

  2. Arlo Blundt 2022-02-08

    Cathy…thanks for your insight into the additional burden of city sales tax. The one half of one percent cut is peanuts, If our economy is so strong, if we’re swimming in “Biden bucks”, if Republican tax policy has made South Dakota a Shangra-La for corporate and trust income, then the tax burden on the working poor should be able to be lifted off food, entirely. However, the Republicans love building a healthy budget surplus in Pierre on the backs of the poor.

  3. Richard Schriever 2022-02-09

    My grocery and other receipts in Ecuador include a tax (impuesto) break down for the total. Amounts taxed at the full VAT of 12%, items un taxed, and other items taxed at at least 3 other rates. Fresh foods are 0%. There is also a tear-away section at the bottom of the receipt that can be sent in to the government once a month by us “pensionistas” (old folks – over 65) to get a full refund of the sales taxes we paid.

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