County sales tax is last proposal standing

Rapid City Republican Sen. Taffy Howard stood in the South Dakota Senate on Monday, saying she’d begrudgingly vote for authorizing counties to charge sales taxes. 
“I’m not happy that we’re going to go back to our citizens and say, ‘Probably the only way we’re going to get property tax relief this year is through a new tax,’” Howard said. “I find that abhorrent.”
Yet she voted for the bill, which passed the Senate 20-14 and is now headed to a House committee.
That legislation is arguably the only major property tax relief proposal still officially alive this legislative session, after the failure of other plans Tuesday. The bill would let counties levy up to a half-percent sales tax and use the money to offset the county’s portion of property taxes on owner-occupied homes, in the form of credits to property owners.
Two other bills failed Tuesday that would have captured revenue for property tax relief from raising the statewide sales tax rate. 
One bill would have captured the revenue from a scheduled increase in the state sales tax rate from 4.2 percent to 4.5 percent next year; the Senate vote on the proposal was 16-17, with two members gone, which was two votes short of the 18-vote majority needed for passage. 
The 2023 Legislature adopted a sales tax rate reduction from 4.5 percent to 4.2 percent and scheduled the reduction to expire next year. Rep. Tim Czmowski, R-Sioux Falls, told House members Tuesday that the reduction was “the wrong move.”
“We haven’t really been able to fund and balance,” he said. “We’ve balanced the budget, but I think we’ve compromised on some of the things we hold as priority.”
His bill would have increased the state sales tax rate to 5 percent over a two-year period and used the revenue for property tax relief and funding increases for schools, state employees and Medicaid providers; the House of Representatives vote on that proposal Tuesday was 24-42.
Also Tuesday, the Senate rejected Senate Bill 196, which would increase the income limit for multi-member households applying for the state’s property tax assessment freeze program for elderly and disabled adults from $65,000 to $85,000. The vote to approve the bill failed 15-18.
The county sales tax bill was recommended by Gov. Larry Rhoden, and it stands apart from other proposals because, rather than a statewide approach, it is targeted to specific counties facing property tax issues that choose to implement the sales tax. Rhoden has said that could include fast-growing counties in the Black Hills and in the Sioux Falls metro area, where property tax increases have been especially severe.
Counties are not currently allowed to impose a sales tax. They rely on property taxes, as do public schools. Cities receive revenue from property taxes and sales taxes. The state is reliant on sales taxes. In addition to the state’s 4.2 percent sales tax, cities can charge up to 2 percent, and cities can charge another 1 percent on alcohol, restaurants, lodging and event tickets.
The bill says a decision by county commissioners to impose a sales tax could be petitioned to an election. If sales tax collections exceed what’s needed to offset owner-occupied property taxes, the remaining money would be used to reduce property taxes for agricultural and commercial property.
Lawmakers have introduced and considered more than 50 proposals addressing property taxes since they convened last month, including rejected proposals to divert 25 percent of the state’s annual general fund revenue growth toward property tax relief, resolutions to ask South Dakota voters to approve various property tax relief plans, and other proposals. 
With a little more than two weeks left in the session, some of the failed ideas could still come back as amendments to other bills.
One of the other property tax bills that’s still alive, Senate Joint Resolution 504, would ask South Dakota voters to authorize statewide online sports betting (it’s currently allowed only in Deadwood) and capture tax revenue from it to reduce property taxes. But some supporters of the bill have said the impact on property taxes would be less than other major proposals.
Gov. Larry Rhoden signed Senate Bill 12 into law earlier this session, which adds to an existing law that exempts from property taxes the homes of veterans who’ve lost both legs or the use of both legs. The new law lets those veterans or their surviving, unmarried spouses apply for four years’ worth of refunds if they missed prior application deadlines for the program, or missed deadlines to have their home classified as owner-occupied.
Lawmakers and Rhoden adopted a multifaceted piece of property tax relief legislation last year. It capped countywide residential assessment growth for five years, exempted some home improvements from affecting assessments, expanded eligibility among disabled and elderly people for relief programs, and capped the extent to which local governments can utilize new construction and growth to increase tax collections.
South Dakota Searchlight’s Meghan O’Brien contributed to this report.
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