Governor-backed plan advances as Legislature continues to cull property tax reduction ideas

The South Dakota Senate endorsed a proposal recently that would allow counties to implement a half-percent sales tax to reduce property taxes for homeowners.

The bill passed the chamber with a 20-14 vote and now goes to a House committee.

The plan is from Republican Gov. Larry Rhoden. It 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.

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.

Sen. Randy Deibert, R-Spearfish, told lawmakers the plan would benefit his constituents. The Black Hills generates some of the highest sales tax revenue in the state.

“We need many, many tools for tax relief, and this is just one of them,” Deibert said.

Sen. Tamara Grove, R-Lower Brule, raised concerns about how new sales taxes, such as in the Black Hills or Sioux Falls area, would affect rural South Dakotans who regularly travel to larger cities for shopping and entertainment.

“My little communities, we’re already struggling now because we don’t have an option but to come to your big cities,” Grove said. “We are going to be helping pay your taxes, and although I think we are very generous people in the middle of South Dakota, I don’t know if we want to be that generous.”

More action

on other tax bills

In other action, Senate Bill 199, which would divert 25 percent of annual state general fund revenue growth toward property tax relief, failed 17-16 in the Senate.

Two property tax-related bills were recommended for approval by the Senate Taxation Committee. 

House Bill 1260 would allow more cities to create their own local property tax refund programs in addition to state programs. Sioux Falls offers up to $500 refunds for city residents who participate in the state’s assessment freeze program for the elderly and disabled. The city is able to do so because it operates under a home rule charter, which means it can exercise its own legislative power in issues that are not explicitly prohibited by the state constitution or law.

Senate Bill 196, also approved by the committee, 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 House Appropriations Committee rejected a bill that would have given South Dakota homeowners a property tax credit if they paid tuition at a private school.

The Senate State Affairs Committee rejected a resolution that would ask South Dakota voters to approve a constitutional amendment that would limit the assessed value of properties and a resolution that would ask voters to increase the state sales tax for property tax relief.

Other proposals are still pending to raise the statewide sales tax rate and devote the proceeds to property tax reduction.

Makenzie Huber is a lifelong South Dakotan who regularly reports on the intersection of politics and policy with health, education, social services and Indigenous affairs. Her work with South Dakota Searchlight earned her the title of South Dakota's Outstanding Young Journalist in 2024, and she was a 2024 finalist for the national Livingston Awards.

South Dakota Searchlight is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.