Three weeks ago, Northern Plains News reported that Boobgate stars Mike Mueller and Julie Frye-Mueller and their fellow radical Republican Matt Smith are promoting an initiated constitutional amendment to abolish property taxes and replace that lost revenue with a retail transaction tax. Frye-Mueller is a notoriously unreliable source, hubby Mike cast all sorts of doubt on NPN’s original report, and the proponents’ website doesn’t offer the specific plan, so I waited until the Legislative Research Council posted the actual draft amendment with its statutorily required comments.
The LRC produced its response to the Frye-Mueller-Smith proposal on August 14, but the Secretary of State’s office did not post that document to the 2026 ballot question webpage until yesterday (I love ballot questions, so I’ve been checking every day since NPN published its story).
In this original draft form, the proposed nine-section amendment makes the following significant changes to South Dakota’s constitutional tax structure:
- The amendment eliminates property taxes in South Dakota except as a mechanism for paying off public debt (Sections 1–7, 9).
- School districts lose the authority to impose taxes (Section 2).
- The amendment imposes a tax of $1.50 on every retail transaction of $15 or more (Section 8).
- The amendment taxes purchases of less than $15 at 10% (Section 8).
- The Legislature may increase the transaction tax annually “by the lesser of five cents or an amount estimated to provide the moneys necessary to replace the revenue foregone from the prohibition on real property taxes” (Section 8).
- Proceeds from the transaction tax go into a state fund that the state disburses to schools, counties, cities, and other taxing entities to replace the lost revenue from property tax (Section 8).
Remarkably, the LRC suggests no revisions to the transaction-tax proposal. LRC marked up all four of the other initiatives in the hopper and has niggled about finer points of lawmaking language in every draft initiative submitted over the past several years. To spend what appears to be the full 15-working-day review period producing zero guidance for the sponsors suggests LRC just wanted to sit on this proposal as long as possible without providing the sponsors any help.
The LRC does offer the transaction tax sponsors one bit of legal advice: “…you may want to consider whether this proposal has any impact on the State of South Dakota’s compliance with the Streamlined Sales Tax Agreement.” That’s the same legal pretext Attorney General Marty Jackley trotted out to sandbag Rick Weiland’s initiative to repeal South Dakota’s regressive food tax in the 2024 election cycle. I would suggest the proposed transaction tax is more streamlined than any of South Dakota’s current sales taxes; instead of varying rates from town to town and $1.48 billion in exemptions.
The LRC makes the obvious point that this amendment will affect revenues and budgets and thus will require a fiscal note. I am keenly eager to read the LRC’s calculations of how many retail transactions take place in South Dakota and how close a $1.50 charge for doing almost every little bit of business will come to replacing the $1.789 billion the schools, counties, and other political subdivisions collect each year in property taxes.
The LRC gives the sponsors a pass on the single-subject rule, declaring that the amendment “appears to embrace only one subject—taxation.” It won’t take much creativity from the Secretary of State or lawyers for the schools and counties and conservation districts to demonstrate that this amendment does indeed embrace multiple subjects: elimination of property tax, elimination of schools’ taxing authority, imposition of a new transaction tax, assignation of tax revenues to a specific fund and purpose. The single-subject rule is an unnecessary and arbitrary restriction on the initiative process, but as long as we have it, it’s there for opponents to use against initiatives, and contrary to LRC’s casual assessment, the transaction-tax initiative is ripe for a single-subject challenge.
The sponsors of this amendment face a time crunch that may prevent them from circulating petitions to place this measure on the 2026 ballot. The LRC issued its response on August 14. If the sponsors submitted their final amendment language the next day, August 15, to the Attorney General, the AG’s 80-day review period extends to exactly November 3. By the end of that same day, the sponsors must put in the Secretary of State’s hands physical and electronic copies of their proposed amendment along with a properly formatted petition that includes the Attorney General’s explanation and the LRC’s fiscal note. If Attorney General Marty Jackley wants to stifle this amendment (and his Republican establishment is already poo-pooing the proposal), he need only drag out his review porcess, as the LRC appears to have done, until the last possible moment, issue his revised explanation at 4:59 Central on November 3, and leave the sponsors without the time necessary to print their petition and hand it to the Secretary of State.
Stay tuned—I’ll dig into the numbers and the nutty philosophy behind the Muellers’ transaction tax in subsequent posts.