The backers of an initiated constitutional measure to abolish property tax and impose a retail transaction tax are lying to the public about its fiscal impact:
They say the state’s budget wouldn’t be affected, as the losses from property tax revenue would be negated by a different source under their proposal.
“It’s replacement revenue that comes in via retail transactions across the state,” [petition sponsor Mike] Mueller said. “60% of this revenue is generated by our visitors” [Brad Walton, “Group Seeks to Abolish Property Taxes in South Dakota,” KOTA-TV, 2026.03.17].
Conservative activists Mueller and his co-sponsors, wife and former legislator Julie Frye-Mueller and Matt Smith, have peddled this fiscal fiction since announcing their initiative last summer. My initial analysis indicated that a $1.50 tax on retail transactions of $15 or more and 10% on smaller transactions would produce $698 million less revenue than property taxes generate each year. The Legislative Research Council estimated in October that Team Mueller’s retail transaction tax would fall $850 million short of the $2.018 billion that property taxes provide to cities, counties, schools, and other taxing districts.
That’s a 42% shortfall. That’s a big impact on local government budgets.
In an explainer attached to its formal fiscal note, the LRC does support Team Mueller’s claim that “60% of this revenue is generated by our visitors”—the LRC figures out-of-state visitors would produce $691.2 million of the $1.167 billion it expects from a retail transaction tax, 59.2%. But subsequent data from the Department of Tourism say that figure is inflated: per-tourist spending figures the ever-ebullient Department of Tourism presented to the Government Operations and Audit Committee in November indicate tourists would generate only $278 billion a year. Revise the LRC’s estimate to reflect that lower tourist revenue, and the deficit created by Team Mueller’s proposal rises to $1.26 billion.
That’s a 62% shortfall. That’s a huge impact on local government budgets. And that creates a huge problem for the state budget, which won’t get nearly enough cash from the retail transaction tax to replace local property taxes and will thus force legislators to decide whether to raise other taxes to make up the difference or let schools, counties, and cities go bankrupt.
Team Mueller’s petition includes the LRC fiscal note. Voters signing to place this dangerous constitutional amendment on the ballot can see the sentence, “This change creates an estimated net loss of ($850.3) million in funding for political subdivisions.” If Mike Mueller tells signers the same thing he told KOTA-TV News, he’s lying to their faces. No independent fiscal analysis supports the claim that a retail transaction tax will completely replace property tax revenue.
During the last petition cycle, conservative activist and Representative Jon Hansen (R-25/Dell Rapids) roped Attorney General Marty Jackley into threatening abortion-rights petitioners with legal punishment for allegedly “providing misleading information to the public.” Now Hansen and Jackley’s conservative friends are documented on TV news to be providing misleading information to the public. Jon, when will you be dogging Team Mueller’s petition circulators for deceiving petition signers? Marty, when will you be issuing your letter advising Team Mueller to “work with circulators to comply with the requirements of South Dakota law… avoid or limit allegations that petition signatories are being misled”?