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Karr Sales Tax Cut May Save $12M Less Than Food-Tax Repeal

The LRC appears to be saying that House Bill 1137, Representative Chris Karr’s (R-11/Sioux Falls) two-year reduction of the state sales tax from 4.5% to 4.2%, will save taxpayers less than Governor Kristi Noem’s failed repeal of the sales tax on food:

The fiscal note for Noem’s HB 1075, which sought to cut the 4.5% rate to zero on groceries, says it would reduce state revenue by $115,578,750. That is based on the sales-tax estimate for fiscal 2024 that the Legislature’s Joint Committee on Appropriations set February 15.

…The governor’s finance commissioner, Jim Terwilliger, told a House committee on January 26 that Noem’s approach would cost the state treasury about $102.4 million. That was three weeks before the JCA made its estimate for the coming 2024 budget year that starts July 1.

…Karr’s HB-1137 originally proposed reducing the sales-tax rate to 4% across the board. The LRC fiscal note for that approach showed an estimated impact of $173,541,667, based on the February 15 sales-tax estimate. Karr subsequently scaled back his proposal to 4.2%. The LRC hasn’t prepared a new fiscal note. However, that change points to an estimated impact of $103.8 million.

Karr, who serves on the House Appropriations Committee, told the panel’s members on February 21 that his 4.2% rate would cost the treasury about $104 million. The committee that day chose his approach rather than the governor’s bill [Bob Mercer, “LRC Estimates Impacts of Possible Sales-Tax Cuts,” KELO-TV, 2023.03.01].

Governor Noem branded the food-tax repeal that she borrowed from Democrats but lacked the skill and attention span to pass as the biggest tax cut in South Dakota history. Expect Noem to recycle that slogan when she signs and claims credit for Karr’s HB 1137.


  1. Mark Anderson 2023-03-01 13:10

    Just a question, who checks the sellers who may see an opportunity to slightly raise their prices? Inflation you know.

  2. All Mammal 2023-03-01 14:13

    P. Aitch- praying you are safe from the recent supermarket shooting, avalanches, and all the other formidable CO crises. Come back to us(:

  3. buckobear 2023-03-01 17:56

    What comprises the $102 million figure? Total grocery store sales or just basic food (veg, meat, dairy and bakery not candy, greeting cards, foot powder, etc)??

  4. Cory Allen Heidelberger Post author | 2023-03-01 17:59

    Mark, no one will check that prospect. Is there much chance a sales-tax cut would result in such sneaky inflation? Stores advertise before-tax prices, not after-tax prices. If stores tried to keep the sales-tax cut for themselves, folks would notice…

    …or would they? 4.5% of a $5 box of cereal is 22.5¢, which rounds up to 23¢. 4.2% of $5 is 21¢. If grocers tack 2¢ onto a $5 box of Special K, will shoppers notice?

  5. grudznick 2023-03-01 18:43

    grudznick, being a good citizen, in fact a top notch civic minded citizen of the Great State of South Dakota, will donate my $112-per-person savings back to the state. This is so much hullabaloo about nuttin’. But when you talk about $102,000,000, now that’s real money that you could use to give teachers on the higher end of the SILT some raises!

  6. O 2023-03-01 18:52

    grudznick and I are on the same page: this is not meaningful across-the-board individual tax relief, but it is meaningful budget reduction that has real impact on crucial programming.

  7. grudznick 2023-03-01 19:08

    Mr. O did well to understand my meaning so accurately. I know only the sharpest among you would grasp what grudznick was saying.

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