Press "Enter" to skip to content

If Food Tax Is Bad for State, Isn’t It Just as Bad for Cities?

The Republican spin machine is having trouble keeping up with its prime sponsor Governor Kristi Noem’s shocking flip-flop to support the long-standing Democratic proposal to repeal the state sales tax on food. After running the Governor’s Wednesday press release on her election-season promise to stop baby food and other groceries, Pat Powers has only mustered a brief commentary on the fact that neither Noem nor her challenger in the election, Representative Jamie Smith (D-15/Sioux Falls), would prohibit municipalities from extracting their penny or two of sales tax from each local grocery dollars.

Interestingly, I had this very conversation yesterday with a State Legislator who voiced the concern that for many small towns, the sales tax on food is their main source of tax revenue. South Dakota Municipalities are likely to line up against cutting a source of revenue where everyone, property owner and renter alike have some skin in the game in funding city services. Especially in communities where they just don’t have that much. Because the alternative would be higher property taxes, or new forms of revenue [Pat Powers, “Food Taxes Probably Aren’t Going to Go Completely Away. Candidates Saying NO to Stripping Municipalities of Sales Tax on Food,” Dakota War College, 2022.09.30].

This concern about denying small towns revenue from whatever overpriced groceries people are still buying at their local grocers instead of making the hour trip to Hy-Vee or Kesslers or Safeway appears to inform the initiative Dakotans for Health is proposing for the 2024 ballot. That measure would prohibit the state from taxing food, but it would not restrict municipalities from doing so.

But the arguments Powers says he heard from some unnamed legislator—main source of revenue, everyone has skin in the game, raising other taxes—do not uniquely indict a repeal of municipal food taxes. They apply to the Democratic plan that Noem has endorsed for election points as well:

  • If the revenue shortfall at the local level makes repeal of the municipal food tax a non-starter, the revenue shortfall statewide should also give us pause. The $100 million Noem says the food tax repeal will save blows a big hole in the state budget. That’s over half of our corrections budget. That’s more than the $55 million we spend to run the courts and the $36 million we spend to run the Legislature and pay other elected officials. Can we simply do away with that money and the programs they support?
  • If we have to tax food to ensure that every local citizen has “skin in the game” supporting local services like the public library and the city park, don’t we have the same obligation to tax food to ensure every South Dakotan has “skin the game” supporting state services like our state parks and universities and Highway Patrol?
  • If we can’t talk about banning city food taxes for fear that cities would be forced to fill that budget hole by increasing other taxes, aren’t Noem and the Democrats creating the same predicament for the state? Is Noem proposing a higher sales tax rate on prepared food and non-food items? Is she proposing a new property tax? Is she coming to her senses and stabilizing South Dakota’s two-legged tax stool by adding the logical third leg, a state income tax?

Maybe quashing the idea of extending the food tax repeal to the local level is Powers’s backhanded way of signaling to his divided party (or for Noem herself?) that the Governor’s proposal to repeal food tax is just an election stunt and not a real policy that she’ll fight for come January (if she’s still on the Second Floor in Pierre). Sponsored by Noem, Powers can’t say, “Noem’s food-tax repeal is bad!” but diverting to the municipal tax issue allows him to post the exact reasons for opposing any food tax repeal without sounding like he’s arguing with his patron or undermining her new Democratic campaign position.

Supporting a repeal of the state’s food tax while leaving municipal food taxes in place is, of course, a pragmatic position, which we should expect from great pragmatist Jamie Smith. Democrats have found it tough enough to get a hearing for their food-tax repeals over the years. Putting a dent in municipal revenues would make that push even harder.

But just as the arguments against repealing municipal food tax work against repealing the state food tax, the arguments that Democrats and now Kristi-Come-Lately make for repealing the state food tax make just as much sense as arguments for repealing municipal food taxes. The food tax is an immoral tax. We are taxing the basic stuff of life: baby food, bread, milk, bottled water, apples, meat, and cheese. That “skin in the game” is a pound of flesh taken from rich and poor alike, and the poor don’t have that flesh to spare. We should not fund any government services—local, state, or federal—with an immoral tax.

Governor Noem says her promised food tax repeal is about “Saving South Dakota Families“. Representative Jamie Smith and his fellow Democrats have supported repealing this immoral tax for years. But the argument against taxing food to pay for state government applies equally against taxing food to pay for local government. Passage of the Democratic plan for the state to stop taxing groceries should prompt city governments to have the same conversation about the immorality of taxing the basic stuff of life.


  1. John 2022-10-03 08:06

    Agree. There should be NO TAX on the purchase of food. Municipalities can figure out their budgets as they’ve done in upmteen states without sales taxes on food.

  2. Ryan 2022-10-03 09:32

    “You know what my favorite number is? Umpteen. It sounds big, but it’s in the teens.” – James Acaster (genius)

  3. El Rayo X 2022-10-03 09:59

    Prior to the 2023 South Dakota Legislature convening, show us what the state budget would look like without the food sales tax revenue. Then, we’ll see if the sales tax on food gets repealed. If it means cuts in payments for skunk tails and Mt. Rushmore fireworks lawsuits, then is’s not going to happen.

  4. Cathy B 2022-10-03 11:35

    Larry K, Wonderful article about Ray Ring! Thanks for the reference.

  5. Curt 2022-10-03 12:31

    What about the “streamlined sales tax” requirement?

  6. Cathy B 2022-10-03 13:16

    Curt is right to realize the streamline sales tax agreement is involved here. For one thing, the state and cities must tax the same things. Thus, to end the state portion but not the city portion, we get around that rule by simply making the state’s tax zero percent. The streamlining rules allow states to have a lower tax rate for food, even zero, (and maybe for utilities too?). Another rule is that each city may have only one sales tax rate. ie, A city must tax everything that it taxes at the same rate. Before the streamlining rules, cities had a 1% limit. This streamlining rule pushed cities to raise the rate on food. Some cities that had sales tax were (understandably!) not taxing food at all. Thus, city food tax in those towns went from zero to 2%. These were Rapid City, Spearfish, Mitchell, Pierre, New Underwood and Wentworth. I think it is important to point out that back in 2003 some of us could see that the rules were going to increase the tax on food and lobbied the legislature to do something to compensate, ie, lower the state’s rate on food. There was hullaballoo at the legislature at that time. A big display in the rotunda was several tables of food to show what three weeks of food for a family of 4 looked like. Rep.Alice McCoy had a bill. Rep.Williamson had a bill for 2% off. Nothing but a disastrous rebate program was the upshot, but I do recall that legislators told us that when the state started realizing the revenue from taxing online sales (the purpose of the streamlining rules), then the tax could come off food. Now in 2022, Appropriations Committee members have concluded that that day has come. Thus, this year’s effort to cut food tax gained more traction. It sure is a shame that some other legislators and the governor opposed, or the state’s food tax could be zero already, giving hard working families more buying power for their food dollar, that they sorely need.

  7. Curt 2022-10-03 13:29

    Good answer, Cathy B. I especially enjoy the ‘ask-the-expert’ feature on this blog.

  8. Arlo Blundt 2022-10-03 16:15

    Regressive?? I guess that’s when you tax food everyone must have and do not tax either principal or interest on the billions of dollars in trust funds held only by the very wealthy in Sioux Falls and Rapid City Bank Trust accounts. How many billions?? Nobody knows.

  9. larry kurtz 2022-10-03 16:21

    Here in New Mexico livestock feed isn’t taxed either and our senior citizen cannabis discount cancels that tax!

  10. Observer 2022-10-03 16:27

    Maybe Kristi could flip-flop again and introduce a new “Death Tax” to make up for the lost revenue???

  11. grudznick 2022-10-03 17:09

    grudznick has said it.

    Governor Noem’s idea to repeal sales tax on food is a bad idea.

  12. grudznick 2022-10-03 17:17

    Mr. Blundt, did not those fellows with the trust funds pay their taxes when they earning the dollars, or perhaps when they take the dollars out of the trust funds? Would it be double taxation or not to slowly siphon off somebody’s savings? I am simply asking a question because I do not know the answer.

  13. Curt 2022-10-03 17:43

    Grudznick is a “bad idea”.

  14. O 2022-10-03 18:04

    grudznick, is it double taxation when I am taxed on my income, then taxed again on those same dollars when I use them to pay for my groceries?

  15. Jake 2022-10-03 18:40

    grudz-get a load of GOP sh– off your brain by realizing, admitting, that the poorer of the state, from the upper 80% of income down, don’t have the resources, time, or implicit inane love of the last penny to be concerned over just making it thru today and into tomorrow without harm. You and your GOP cohorts have destabilized the country by your lies and innuendo for far too long. trump loves your ilk, as does the KGB boy in Russia and the new heart throb of the Republicans in Hungary. Just keep listening to Fox’s Tucker Carlson, grudz, he will give you what you need. You and he deserve each others. Instate you have a lot of company, son, from the leadership of your party down to the clowns following him. Not to mention the clowness on the Palomino horse.

  16. P. Aitch 2022-10-03 18:41

    Good one, O.

  17. Arlo Blundt 2022-10-03 19:01

    Maybe they paid taxes on the income and maybe they didn’t…most likely didn’t though rules differ state to state and locality to locality. There are PLENTY of loopholes in the federal tax code…it’s swiss cheese. Ask Donald Trump.

  18. Arlo Blundt 2022-10-03 19:36

    Grudz-No, in fact, the state would not “slowly siphon off their savings”. The billions in those Trust Funds are not idle, but are working like beavers, after being invested in “financial instruments, blue chip securities, and bonds.” The state could tax at 1% of annual earnings and both parties would still be doing very well for the effort. It will be a cold day in the Sahara when money invested in Trusts loses its value.

  19. grudznick 2022-10-03 20:35

    Some of you fellows are just plain being mean to ol’ grudznick just for politely asking a question. So I remind you, grudznick very much dislikes Mr. Trump and has been voted the most loved Conservative with Common Sense at this here blogging place for 5 years running, so try and show a little respect.

    Mr. Blundt, I guess I could understand if the earnings in a trust were somehow taxed or even if institutions holding the trusts were taxed like banks chartered in the Great State of South Dakota are. I don’t know how that works, but apparently it does.

  20. Arlo Blundt 2022-10-03 22:27

    Grudz..your questions are appreciated and I’m just giving an opinion..there would be plenty of arguments regarding taxing interest on Trusts if a bill were introduced. The tax on very large banks (most are exempt) works about as well as the tax on Homestake did.

  21. O 2022-10-04 08:04

    It also seems to be the case that many of those worried about being “taxed twice” are often not being taxed once.

Leave a Reply

Your email address will not be published.