Joshua Haiar/South Dakota Searchlight
A campaign committee has launched a referendum effort to repeal a new law that would use money from a scheduled statewide sales tax increase to lower property taxes for homeowners.
Lawmakers reduced the sales tax rate from 4.5% to 4.2% in 2023, with the reduction scheduled to sunset next year.
The new law, Senate Bill 245, directs the estimated $110 million or more in sales tax revenue to a fund that offsets property taxes going toward public education. Additionally, $56 million in general budget funds will be used to lower property taxes immediately, rather than waiting for new sales tax revenue to come in.
Ned Horsted chairs the referendum committee, South Dakotans for Fair Taxes.
“Everyone in South Dakota pays sales tax for everything that they buy, from groceries for their families to tractors for their farm,” he said. “This bill takes a tax increase and puts it into a fund that benefits only South Dakotans with owner-occupied homes. Roughly one-third of South Dakotans are not homeowners and would see no benefit. In fact, with this bill, these people would see their tax dollars go to subsidize the other two-thirds of South Dakotans who are fortunate enough to own their homes.”
Horsted called it a “permanent transfer of wealth” that “benefits predominantly older and wealthier people,” noting that the more expensive the house, the bigger the break in property taxes.
Dakota Rural Action, a grassroots political organizing group, is listed as an affiliate organization of South Dakota for Fair Taxes.
Meanwhile, another new law, Senate Bill 96, allows counties to implement an additional 0.5% sales tax to decrease property taxes for homeowners in those counties. Horsted said his group is not trying to overturn that law.
“We have 59 days to get 17,508 valid signatures,” he said. “Senate Bill 245 impacts our entire state, and with Senate Bill 96, any creation of a sales tax at the county level will be made with local control, where everyday people often have a better shot at influencing their elected leaders.”
Sales taxes would rise to 4.5% even if the referendum succeeds — that was written into the 2023 bill. Gov. Larry Rhoden told reporters in Sioux Falls on Thursday that opponents seem to miss that.
“What they’re advocating for is just removing property tax relief from the equation,” Rhoden said, noting renters are “going to continue to pay that 4.5% with or without” the new law.
“So, what they’re supporting is nixing the largest property tax reduction we’ve ever seen in the history of South Dakota,” he said.
Rhoden also reminded reporters that in 2023, as lieutenant governor, he and then-Gov. Kristi Noem advocated for removing the sales tax on groceries, but lawmakers declined and instead passed the temporary sales tax cut.
Horested said the property tax cut is simply bad policy.
“South Dakotans are tired of hearing about the ‘largest tax cut in SD history,’ when it’s just moving money around,” he said. “This is not a tax cut, it is a wealth transfer.”
The 90-day clock for collecting signatures began after the legislative session’s final day. If the campaign succeeds, voters will decide in November whether to repeal the law.