Shortly after revival, South Dakota grocery tax repeal rejected by House

March 8, 2023

PIERRE — Gov. Kristi Noem’s grocery tax repeal bill lived for only 17 hours after it was revived Monday.

Makenzie Huber with South Dakota Searchlight reports the House rejected the bill Tuesday morning. An hour later, legislative leaders from the House and Senate killed the property tax rebate program the Senate revived last week, with a suggestion to take a closer look at property tax reform in the future.

“I think there are some issues that still need to be resolved,” said House Majority Whip Kirk Chaffee, R-Whitewood. “I’m not sure this bill is the right one to get it done, but I think the issue is real.”

Now the Legislature is left with two rival tax cut bills that would each reduce the overall state sales tax rate. There are only three days left in the legislation session – Wednesday and Thursday, and March 27, when lawmakers are scheduled to return and consider any vetoes from Noem.

The governor did not immediately issue any public statements about the rejection of her grocery tax repeal. She previously threatened to withhold her support for the state budget if the grocery tax repeal didn’t pass, but avoided using the word “veto.”

One of the two remaining tax relief bills, Senate-approved House Bill 1137, would reduce the 4.5% state sales tax to 4.3%, shaving about $69 million from annual tax collections, with a sunset clause to end the tax cut in two years. It was a compromise worked out with senators who are worried that the state’s surging tax revenues and budget surpluses could subside in the next few years.

The other bill is House-approved Senate Bill 104. It would reduce the state sales tax from 4.5% to 4.2%, which would have an impact of about $104 million, without a sunset clause.

Leaders have appointed a conference committee on HB 1137 to work through their differences on the two bills. The appointed legislators will meet at 9:30 a.m. on Wednesday.

Senate Majority Leader Casey Crabtree, R-Madison, said the goal is adopting a proposal that’s “best for everybody” and still allows the state to fund the “Big Three”: education, state employees and Medicaid providers.

“There were three options out there. Two of them are gone and now we’re down to one. This is just the way this works,” Crabtree said. “At the same time you have those discussions, you have discussions about what we’re going to do with the Big Three and a couple of the other priorities that are out there, and it’s easily coming together.”

House Majority Leader Will Mortenson, R-Pierre, suggested the House would consider a sunset clause in exchange for a larger tax cut.

“The House plans on being here as long as it takes to get the job done,” Mortenson said.