O.K., we’ve had our parliamentary fun; now on the policy itself:
The Senate yesterday took up Senate Bill 195, Senator Chris Karr’s (R-11/Sioux Falls) latest attempt to make the sales tax reduction he won three years ago permanent. In 2023, the Legislature reduced the sales tax from 4.5% to 4.2% but scheduled the rate to revert to 4.5% on July 1, 2027. SB 195 would strike that sunset clause.
Senator Karr opened debate on Senate Bill 195 by reminding the Senate that, nine years ago, the state promised to use the new Wayfair sales tax on remote sellers to reduce the sales tax rate. He said keeping the rate at 4.2% provides additional stability and certainty for families and businesses planning their spending.
Senator Michael Rohl (R-1/Aberdeen) rose to resist repealing the sunset clause. Senator Rohl said we have to look at a broader picture of promises, like the promises to pay our bills and raise state salaries to match inflation, not just cut taxes and “pass the buck to local leaders”.
Senator Paul Miskimins (R-20/Mitchell) joined Rohl’s resistance. He said the sunset clause was a good cautious compromise, allowing the Legislature to be ready for the cyclic economy to render the state coffers less flush with cash than they were during the pandemic.
Rookie Senator Mykala Voita (R-21/Bonesteel) said with a smile that we should just cut spending. Rookie Senator Mark Lapka (R-23/Leola) alleged that a higher sales tax rate would stifle economic activity (which is funny, because the state economy seemed to be steaming along better back when we had the 4.5% tax rate than it has since the 2023 rate reduction).
Rookie Senator Amber Hulse (R-30/Hot Springs) said nobody at a crackerbarrel back home said the sales tax cut made much difference to them. Calling those 0.3 percentage points a “rounding error”, Senator Hulse said the real bite comes from property tax. She said other states with sales tax rates as low as ours only do so by relying on revenues from oil (Alaska), coal (Wyoming), and sky-high property taxes (New Hampshire).
Rookie Senator Glen Vilhauer (R-5/Watertown) said we should wait until next year, see how revenues pan out, and then decide what to do with the sales tax rate.
Senator Carl Perry (R-3/Aberdeen) reiterated Senator Karr’s point about providing certainty about the sales tax rate (which is funny, since the Legislature can change the sales tax rate every year) and said something about how voting for SB 195 “affirms Legislative success”.
Senator Randy Deibert (R-31/Spearfish) seconded Senator Hulse’s contention that people are hollering for property tax relief, not sales tax relief, and Senator Vilhauer’s call to wait until next year to consider changing the rate.
Senator Jim Mehlhaff (R-24/Pierre) said the voters’ approval of Medicaid expansion “is costing a lot of money” (which is funny, because Medicaid expansion is not costing us as much as Republicans warned it would). He also dinged Senator Voita’s vague call to cut state spending, saying voters really squawk when legislators start cutting real services that voters demand.
Senator Sue Peterson (R-13/Sioux Falls) said the sunset clause is an unjust automatic tax increase “without the consent of the voters”. She alleged that if we polled South Dakotans, nearly all of them would say they want a tax cut, and we have to give people tax relief in any way we can.
Senator Casey Crabtree (R-8/Madison) said he’s seen polling on this issue, and the polling says South Dakotans overwhelmingly want property tax relief, not sales tax relief. (Well, a 2022 South Dakota Retailers poll found South Dakotans generally leaning toward cutting property taxes and saying they were o.k. with the 4.5% sales tax rate, but the Spring 2024 SDSU Poll showed South Dakotans would like relief on sales tax on food.)
Senator Steve Kolbeck (R-2/Sioux Falls) took a great parliamentary position: approving SB 195 and removing the sunset clause takes only a majority vote, while raising the sales tax later if the economy and revenues contract would take a 2.3 vote. Do no harm, said Kolbeck, leave the sales tax on track to bump back to 4.5% next year, and avoid having to make a heavier vote lift to address a possible shortfall.
Senator Karr rose to close debate with rebuttal to opponents of his SB 195. He hotly critiqued competing proposals to use sales tax for property tax relief, saying that taking money from everybody via sales tax and handing that cash to homeowners for property tax relief is “reminiscent of a feudal system, folks. That’s medieval Europe. Is that who we are?”
Half the Senate then went medieval on SB 195, which died on 17–17 vote. Senator Karr intends to move to reconsider SB 195 today.