SD House committee passes grocery tax cut bill

Its the first step for the tax cut bill, which was championed by Governor Kristi Noem during her re-election campaign last year.
South Dakota Bureau of Finance and Management (BFM) Commissioner Jim Terwilliger testifies...
South Dakota Bureau of Finance and Management (BFM) Commissioner Jim Terwilliger testifies before the House Taxation committee in favor of legislation that would cut the state's sales tax on groceries.(Austin Goss)
Published: Jan. 27, 2023 at 8:27 AM CST
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PIERRE, S.D. - A grocery tax cut proposal is one step closer to passing in South Dakota, after the legislature’s House Taxation committee passed it out with a “do pass” recommendation.

The legislation, HB 1075, would remove the state’s sales tax on groceries. South Dakota is one of just a few states across the country who still levies a tax on groceries.

“HB 1075 will tackle the issue of cutting taxes correctly,” said Jim Terwilliger, Commissioner of the Bureau of Finance and Management. “In compliance with our streamline sales tax agreement, it won’t harm our municipalities, and it will deliver this tax cut that already has significant support.”

It has the backing of Governor Kristi Noem, a majority of South Dakotans, and a number of conservative and Democrat lawmakers.

But it’s opposition from lobbyist that committee members spent most of the morning hearing.

“We would submit to you that this is not a sustainable proposition,” said Nathan Sanderson, Executive Director for the South Dakota Retailers Association. “And that the record revenues that you are seeing are largely a result of 8% inflation this year, and 4.7% inflation last year, and a whole slew of federal funds we have gotten in the last couple years.”

Lobbyists like Sanderson, and a number of others representing things like the public education system and big business interests, argued in part that the state couldn’t afford the cut.

With potential economic downturn ahead, they suggested doing so would be short-sighted.

“Counties are broke, roads need fixed, we have needs,” said Rep. Roger DeGroot (R-Brookings). “Someone said in business, when I have a good year, the next year I either pay down debt or get new equipment. I think it is time for the state to buy new equipment and help counties out.”

DeGroot was the only lawmaker on the committee to vote against sending the bill with a “do pass” recommendation to the House Appropriations committee. Other lawmakers raised concerns about specific parts of the bill, saying that they would like to see some more work done to it before potentially sending it to the Governor’s desk.

Rep. Peri Pourier (R-Pine Ridge) raised concerns about the ability Native American reservations to still levy the tax if repealed, while others said they would be open to leaving the tax in place on candy and soda.

But those on the ground argue that it is easy to forget about the human impact of a tax on groceries.

Kristin Johnson owns “Fair Market” groceries in Sioux Falls.

“The amount of sales tax that I have paid out to the state has equaled four semi loads of food,” Johnson said. “I have been open for only about two years, and run about a 5,000 square foot shop... This is the right step, to get rid of the grocery tax and give everybody the ability to spend or save money in a different way than they are right now.”

Rep. Kirk Chaffee (R-Sturgis) chair of the House Taxation committee and a co-sponsor of the bill, believes it time to deliver relief to South Dakota taxpayers.

“We are in a rare moment, where there are some excess dollars, and it would be prudent at the very least to make sure some of that money got back in the hands of the taxpayers,” Chaffee said.

While the bill advanced out of committee with only one vote against it, it still faces an uphill battle to passage. Senate leadership has indicated skepticism around the idea of cutting the tax.