Noem approves tax cut, budget plan, despite disagreements

March 22, 2023

PIERRE, S.D. (AP) — Gov. Kristi Noem signed legislation Tuesday that will reduce overall sales taxes in the state for four years, even though the bill fell short of the permanent tax breaks she had urged.

The new law, which will take effect in July, will reduce the states sales tax from 4.5% to 4.2% — amounting to a general sales tax cut of $104 million per year. It essentially lowers taxes on groceries, but it doesn’t eliminate them entirely as Noem and some lawmakers had wanted.

“Our people deserve permanent tax relief. The legislature has instead offered them a tax holiday for four years,” Noem, a Republican, wrote in her letter about the bill signing. She added: “While this legislation is not ideal or the best way to help the people of South Dakota, I recognize that the legislature has chosen this path, and some help, albeit temporary, for our people is better than none at all.”

Throughout the session, Noem and legislators argued for a tax cut that addressed the state’s $432 million surplus. Noem and a handful of lawmakers, including Democratic Sen. Reynold Nesiba, advocated for the grocery sales tax cut, pointing out that few other states tax groceries to the extent that South Dakota’s does and that food costs were felt greatly at a time of rising inflation.

While mostly Republican lawmakers acknowledged Noem’s efforts, they were steadfast in weighing all options throughout session. Between groceries, sales and property taxes, lawmakers calculated different variations of tax breaks, weighing economic viability with what South Dakotans would support. Noem repeatedly argued that the people of South Dakota can spend their own money better than the government could. Throughout the session’s final days, Republicans pushed amendment upon amendment to try to find the right balance as they narrowed their focus on a broad, general sales tax cut.

Noem’s move comes a day after she signed a $7.4 billion state budget for the 2024 fiscal year, in which she also expressed disagreements with lawmakers.

Education and state employees will receive a 7% funding increase, instead of the 5% Noem suggested, and hospitals will receive a 5% funding increase. Nursing homes and some other Medicaid community service providers will be fully reimbursed. The Argus Leader reported that the 2024 budget signed Monday also accounts for future Medicaid expansion costs, helps National Guard members pay college tuition and freezes tuition at public universities and technical colleges.