Julie Frye-Mueller says the retail transaction tax she and her hubby Mike may try putting to a public vote would make South Dakota’s tax system less regressive:
Frye-Mueller said the transaction taxes would also be applied to purchases that are currently exempt from sales taxes. She and other speakers said it would not be regressive since property taxes would no longer exist or be figured into monthly rental amounts [Makenzie Huber, “From Property to Purchases: Task Force Considering Fundamental Tax Shift to Reduce Homeowner Burden,” South Dakota Searchlight, 2025.07.28].
As she made evident throughout her Legislative career, Frye-Mueller doesn’t understand what she’s talking about. Her proposed constitutional amendment to replace property tax with a $1.50 tax on every retail transaction is profoundly regressive.
Regressive taxes take a larger percentage of poor people’s income than rich people’s. Compare the impact of a 4.2% sales tax on a delivery driver making $15 an hour and a lawyer making $300 an hour. Assume both work 40 hours a week. $31 in sales tax on $500 worth of groceries takes 1.24% of the driver’s monthly pay but only 0.062% of the lawyer’s monthly pay.
Or think of the burden in work time. The driver has to work over two hours to pay the sales tax on a month’s worth of groceries. The lawyer works off that tax in six minutes.
Lifestyle may temper that regressivity. Rich lawyers will usually buy more things and more expensive things than delivery drivers. But $31 in sales tax on basic groceries is still harder for a low-income worker to afford than quadruple that amount on a more extravagant food bill is for a high-income worker.
The proposed retail transaction tax is more regressive than a flat percentage sales tax. The delivery driver pays the same $1.50 on a trip to Wal-Mart for $15 worth of bread, milk, and bologna that the lawyer pays on a trip to Whole Foods for $100 worth of cheese, wine, and smoked salmon. More ridiculously, the kid buying school supplies pays the same $1.50 to get a few notebooks, pens, and crayons as a grown-up pays to buy a fully decked-out Rivian R1S Quad for $130,000.
The sponsors of the retail transaction tax refer to taxation as punishment. Well, their tax punishes working people making two trips to the grocery store for basic necessities more than it punishes trust-fund layabouts for ordering one luxury automobile.
South Dakota already has America’s sixth-most regressive tax system. Replacing the less regressive property tax with a retail transaction tax will only increase the regressive burden on South Dakota workers struggling to balance their budgets.