Julie Frye-Mueller and Mike Mueller’s proposed tax of $1.50 on every purchase you make wouldn’t come close to its alleged purpose of replacing all property taxes. Governor Larry Rhoden’s far more modest proposal for a county sales tax could come close to replacing all county property taxes on owner-occupied homes in South Dakota.
Last spring, after Session, Governor Rhoden proposed allowing counties to impose a sales tax of up to 0.5%. Under the Governor’s proposed legislation, counties could not use their sales tax to increase their budgets; they would have to give all of the money to homeowners in the form of property tax credits.
Using FY2024 data, Team Rhoden estimates that if every county imposed a 0.5% sales tax, the counties would get $164.4 million, enough to replace 94% of the $174.6 million in county taxes on owner occupied property statewide.
But schools, cities, and other taxing districts wouldn’t get to impose sales taxes, so they would continue collecting taxes on owner-occupied homes. Total tax on owner-occupied property in 2024 was $792.3 million, so the statewide average for homeowner property tax relief under maximal adoption of Rhoden’s plan would be 22%.
Farmers, ranchers, and other business people wouldn’t see any property tax relief under this plan unless the county sales tax receipts exceeded the county levies on homes. Rhoden’s data indicate that 39 of 66 counties would take in more money from a 0.5% sales tax than they do from taxing homes, but a lot of those counties are rural areas with low home values. The largest counties that would be able to sprinkle some sales tax into ag and commercial property tax relief are Beadle (where 0.5% sales tax would exceed current owner-occupied property taxes by 69%), Codington (14%), Davison (7%), and, just barely, Hughes (1%).
Governor Rhoden claims his plan cuts taxes for South Dakotans by further fleecing our friends from far and wide:
Rhoden said the plan could save hundreds of dollars annually for typical homeowners in some areas. Counties that opt-in to the plan would shift some of their residential property tax burden to consumers, he said, including tourists from elsewhere making purchases while they pass through.
“Realistically, it’s a tax decrease for the citizens of the state,” Rhoden said [Joshua Haiar, “Governor Proposes County Sales Tax Option to Reduce Residential Property Taxes,” South Dakota Searchlight, 2025.03.31].
Tourists won’t cut renters’ taxes. The commercial properties they inhabit aren’t guaranteed any tax credits, so the Governor’s plan won’t give their landlords any immediate reason to lower their rent. Plus, renters will be paying more sales tax—not a lot, at most 50 cents on every $100 trip to Hy-Vee, but the Governor’s plan still shifts the tax burden from wealthier homeowners to lower-income renters. Governor Rhoden anticipates that complaint but shifts the blame to the counties:
Asked whether the plan might place a greater burden on low-income residents who pay sales taxes but rent their homes and do not directly benefit from property tax reductions, Rhoden acknowledged the concern. But he said the ultimate decision would rest with local officials and voters.
“Every county has different circumstances,” he said [Haiar, 2025.03.31].
If the Legislature passes this county sales tax in 2026, keep an ear out for this shift in Rhoden’s reëlection propaganda: he’ll take credit for cutting property taxes, but he’ll emphasize the counties’ responsibility for increasing sales tax and making South Dakota’s tax system more regressive—not as regressive as a ridiculous retail transaction tax, but still more regressive than a plan that proportionately taxes the wealth the well-to-do bind up in their McMansions.