A bill that would reduce the state sales and use tax by half a percentage point was passed unanimously by the House Taxation Committee and will be sent to House Appropriations.
House bill 1137 is one of many in this session proposing cutting taxes, including one supported by Gov. Noem Abolition of the food sales tax.
Noem touted the controversial proposal as the largest tax cut in the state’s history, and cuts around 120 million dollars annually from the state budget.
Rep. Chris Karr, R-Sioux Falls, said Tuesday during a committee hearing that his bill, HB 1137, would save $168 million in taxes.
The Office of Finance and Management of the Noem administration was the only opponent to testify at the committee meeting, although the Office’s representative encouraged the committee to refer it to House Appropriation for further debate.
“Ultimately, we cannot afford to implement all of these proposals without making significant budget cuts,” said Bureau’s Derek Johnson.
Karr said his bill would be easier to change and implement, especially for retailers to customize tax calculations in their payment software.
“This applies to all goods and services, including food,” Karr said. “Fewer taxes create more disposable dollars. That’s good for retailers in our state; this is good for our citizens.”
The bill would reduce the state sales and use tax from 4.5% to 4% and refund the tax what it was before 2016 when the half percent tax was introduced to help raise teachers’ salaries in the state.
South Dakota faces worse teacher shortage than 2015, experts saywith 176 statewide teaching positions at the end of December 2022, compared to 111 at the end of December 2021. South Dakota’s average teaching position ranks 50th nationally, according to the National Education Association.
Lobbyists for the state’s largest school districts and the South Dakota school board oppose the bill but did not testify during the committee meeting.
Karr said there is a plan to gradually lower the sales tax as the state sees more remote online sales. But that hasn’t happened since the increase.
“Now we’re fully realizing tax collection, and this bill will deliver on the promise in the law,” Karr said. “This is a more realistic and responsible way of looking at excess dollars and tax breaks.”
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