That slurping sound you heard in early March was coming from Pierre. It was lawmakers drinking the Kool-Aid of property tax relief, trying as hard as they could to convince themselves that the best way to provide tax relief for homeowners was through higher sales taxes for everyone.
There were some other property tax bills approved during the session, but the two with the most impact on the most people came from Gov. Larry Rhoden and Speaker of the House Jon Hansen. Rhoden’s idea was to allow counties to collect a half-percent sales tax with the funds to be used for credits to offset the county portion of property taxes on owner-occupied houses.
This was to be a targeted approach at relief for a few counties that have seen the highest increases in property taxes. Time will tell, however, how many county commissions give in to the complaints of homeowners and implement the tax.
Hansen’s bill targeted $114 million in ongoing state funding from next year’s increase in the state sales tax. That tax went from 4.5% to 4.2% three years ago and is scheduled to sunset in July 2027, reverting back to 4.5%. The sales tax revenue will be used to buy down part of the education mill levy.
As a sales tax holiday, the 0.3 percentage-point change in the state sales tax never amounted to much at the cash register. It saves consumers a penny for every $3.33 they spend.
Rhoden’s office claims that the two bills will offer a significant savings for homeowners. In counties that enforce the half-percent sales tax, the estimate is that there will be a 10% to 25% reduction in property taxes with an average savings of $660 per homeowner. His office estimates that the money from increasing the state sales tax will reduce property taxes by 14% to 22% with an estimated savings of $548 on a home valued at $325,000.
Lawmakers seem pretty pleased about offering relief for property taxpayers. There’s a real lack of concern on their part that all of us — regardless of where we live — will end up paying more at the cash register. These relief plans don’t take into consideration that not everyone earns enough to own their own home. Those people are likely to be at the lower end of the economic scale, but they’ll have to pay more as sales taxes go up.
One of the selling points for offering property tax relief through higher sales taxes has been that South Dakotans won’t pay it all. The sales taxes paid by tourists are going to chip in as well. That’s true, but it won’t keep South Dakotans from paying more every time they go to buy something.
Homeowners, in particular, will be faced with a round robin of payments — sending in checks to pay for their property taxes while funding the plans that are supposed to offer them relief by writing bigger checks for everything that they purchase.
Since its inception, there have been lawmakers trying to make the reduction in sales taxes permanent. So far, they have failed, but they’ll get one more shot at it before the sales tax holiday meets its sunset.
Imagine how different life would have been in the Legislature this year if, instead of trying to make the tax holiday permanent, lawmakers had the fortitude to move the sunset up a year. Imagine the kind of budget relief that $114 million could have offered to school districts, state employee salaries and health care. It would certainly beat the penny saved on a $3 purchase.
School districts have come to rely on opting out of state-imposed property tax limits as money runs short to meet their financial needs. All the while, teacher salaries have taken up permanent residence in the basement of national rankings. All this is owed to the people who just voted to raise the sales tax a couple different ways. Schools face these problems because the state isn’t paying its fair share — its mandated share — of the cost of education.
Opponents of the increased sales taxes accuse their colleagues of picking winners and losers. Surely those who have the wherewithal to own their own homes are the winners. The losers are anyone who needs to buy anything. We’ll all pay more so that a few can get some relief. Where’s the relief in that?
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