SJR 507: Hulse Seeks Statewide Vote on Repealing School Taxes on Homes, Raising Sales Tax to 5%

With the Legislature still struggling to coalesce around any plan to lower property taxes, rookie Senator Amber Hulse (R-30/Hot Springs) proposes punting the issue to the voters.

Senator Hulse’s Senate Joint Resolution 507 would place on the November ballot a plan to take away school district’s ability to tax owner-occupied residential property for general funds and special education. School districts could still tax ag and commercial land. SJR 507 would replace those lost property tax dollars by raising the state sales and use tax from 4.2% to 5.0% and putting the money raised by those eight extra tenths in a local effort replacement fund.

Senator Hulse’s SJR 507 is a more modest proposal than Senator Jim Mehlhaff’s (R-24/Pierre) SB 99, which would have zeroed school levies on all property for general and special education and replaced that revenue with a 6.2% sales tax. That plan died in Senate Taxation on January 28.

SJR 507’s language is a bit slippery: I don’t see any mandate that the Legislature use the additional sales tax to replace dollar for dollar what the school districts lose in owner-occupied property tax. I’m also not sure the dollars match: I estimate from 2024 property tax figures that schools collected $446 million from homeowners, while my calculations on the Muckey-Wittman food-tax repeal indicate that raising sales tax on everything including food to 5.0% would generate $278 million. Committee hearings will give Senator Hulse a chance to explain whether her intent is to balance those figures or to give a net tax break by reducing support for K-12 education.

Three election-nerd notes on SJR 507:

1. Senator Hulse frames SJR 507 as a law, not a constitutional amendment. That’s wise, since we don’t want to start locking specific tax rates into the state constitution. But it’s unusual: almost every measure the Legislature places on the ballot is a constitutional amendment, which can only be enacted by a statewide vote.
2. The Legislature would have to muster two-thirds majorities in both chambers to increase sales tax itself. But placing SJR 507 on the ballot requires only simple majority votes, and voters would be able to pass SJR 507 with a simple majority vote. Senator Hulse may be thinking that the Legislature won’t be able to reach two-thirds support for any plan to pay for property tax relief and that it may be easier to get a simple majority of her colleagues and her voting neighbors to back a homeowner-property-tax/sales-tax swap.
3. If approved in November, SJR 507 would go into effect less than two months later, on January 1, 2027. SDCL 2-1-12 says ballot measures are supposed to go into effect on July 1 following the election, but that applies to initiated laws, not laws put to a vote by the Legislature.