A couple weeks ago, the Legislative Research Council posted its conclusion that the retail transaction tax proposed as a ballot initiative by Mike Mueller and friends would generate $1.167 billion dollars a year. 59% of that revenue, $691.2 million, would come from out-of-state visitors.
A little fiscal nugget in the Government Operations and Audit Committee’s conversation with the Department of Tourism’s deputy secretary Wanda Goodman last Thursday suggests LRC’s estimate of tourists’ shareof the retail transaction tax is inflated:
The 2025 year has been a “somewhat strange year” for tourism in the state, Goodman said.
Yet the money spent per person increased from $181.74 to $185,37 which is not adjusted for inflation, she said. The state’s Bureau of Finance Management said the tourism tax revenue impact was $399 million in 2024 and $408 million in 2025, Goodman said [Rae Yost, “GOAC Asks: What Is a Tourism Job?” KELO-TV, 2025.11.17].
The Department of Tourism has said South Dakota gets 15 million visitors a year. Multiply $185.37 per visitor by 15 million visitors. That’s $2.78 billion in total spending.
The retail transaction tax would charge spenders $1.50 for each trip to the cash register that involves spending $15 or more and 10% on total purchases less than $15. Let’s assume the optimal revenue situation, in which visitors would buy everything in $15 chunks. Divide $2.78 billion by $15: that’s 185 million retail transactions. Multiply 185 million transactions by the $1.50 tax we’d collect on each one:
$278 million.
That’s far less than the $691.2 million LRC projects in visitor retail transaction tax revenue. That’s far less than the $509 million I calculated under my own generous economic assumptions.
Adjusting our visitor tax soakage to the Department of Tourism’s visitor spending figures would reduce the total revenue generated by the retail transaction tax from $1.167 billion to $754 million. That would leave the retail transaction tax $1.26 billion short of the property tax revenues it is supposed to replace. Instead of the 42% cut in revenues LRC projects, schools, counties, and cities would face a 62% reduction in funding.
No matter whose figures we look at, we still have no data supporting the retail-transaction tax sponsors’ claim that their plan “would completely cover the annual total of property tax revenue in the state.”
I don’t believe this bill was even attempting to make much money. Republicans want to cancel the “liberal” schools so they get dumb, gullible people who believe whatever they tell them and vote Republican.
Who does the distribution? Which counties would be favored? Gee it will be fun to see this fiasco in action.
Below is copy/pasted from the Black Hills Pioneer. The stats are from April, 2025.
“The current gaming handle in April was $128,594,075.42. Operators contributed $2,229,085.87 in “free play” to customers in April, bringing the taxable gross avenues for the month to $11,684,165.69. A total of $1051,574.91 was collected in gaming tax, with $116,841.66 going to the state general fund, $373,893.30 to South Dakota Tourism, and $93,473.33 distributed to Lawrence County.”
Here is part two of my comment. It was too long for one post…
SD Tourism receives $400k to $500k or more, EVERY MONTH !! From Deadwood. That is a huge amount of money. How come they need even more? How come they get so much, but the state general fund does not? I thought the proceeds from gambling were supposed to go toward schools. How is all this money being spent by SD Tourism? How much do they pay their staff? I think it is obscene that schools and libraries are facing shortfalls, yet so much is spent promoting tourism. Also, the math isn’t mathing. How come the total tax amount is far above what the state, the county, and tourism receive. Where does the rest of the tax revenue go?
BAH. It is known the Council of Research for the Legislatures are shills for the Speakers of the Houses. This young Ms. Goodman lady is hopefully not pulling her numbers from the legislatures’ dirty data, and causing Mr. H to do more bad math.
South Dakota Democrats need to run on a corporate income tax, ending video lootery, reducing the number of South Dakota counties to 25 and turning Dakota State and/or Northern State University into community colleges.
Justin, I could be persuaded that you’re right. Radical rightwingers are pushing in multiple states to get rid of property taxes. I don’t think they really want to replace that revenue with any fairer scheme of taxation; they just want to play Grover Norquist and shrink government (and those darned liberal—i.e., fact-based—public schools) until they can drown it in a bathtub.
Ms. Frye-Mueller is married to a “freedom fighter,” not a mathematician. Then you put the Council of Research for the Legislatures bad math on top of that and you have a two-handed chokehold on funding local governments and schools. The only way to combat the cuts is to combine school districts and reduce the number of counties in South Dakota by half.