South Dakota committee recommends making sales tax cuts permanent

(The Center Square) – The South Dakota House Taxation Committee recommended that tax cuts enacted last year become permanent.

The Legislature cut the sales tax from 4.5% to 4.2%, with the reduction expiring in four years, a move added by the Senate, according to Rep. Chris Karr, R-Sioux Falls, the bill’s sponsor.

Karr cited a long list of economic data to support making the tax cuts permanent. The state is ahead of adopted budget targets for fiscal year 2024 by $131 million, he said. The expected impact of the tax cuts is less than expected, according to Karr.

But some members of the state’s business community disagreed. Nathan Sanderson, executive director of the South Dakota Retailers Association, said inflation and federal dollars have helped the state’s economy. The influx of federal dollars increased from $1.8 billion in fiscal year 2021 to $3.5 billion the next year, he said.

Inflation rates, including the 8% rate for the calendar year 2022, have been the highest three-year average in a century.

“It’s absolutely true we are seeing revenues go up,” Sanderson said. “But those revenues are not going to stay up forever because that federal money is going to go away and that’s why we are opposed to House Bill 1001.

The committee voted to recommend passage of the bill by a vote of 11 to 1, with Rep. Roger DeGroot, R-Brookings, casting the lone “no” vote.