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.”