SIOUX FALLS, S.D. (KELO) – Despite recent criticism from Gov. Kristi Noem, South Dakota lawmakers from both parties are standing by the work accomplished in the 37 days of this year’s legislative session.
After a bill signing Wednesday, Noem told KELOLAND’s Perry Groten it will be “tough” for her to sign House Bill 1137 which cuts the overall sales tax rate from 4.5% to 4.2% for the next four years.
“Anybody who says it’s a tax cut, just isn’t telling the truth,” said Noem, adding she considers it a “tax holiday” because of the sunset clause that would repeal the bill’s tax cut on June 30, 2027. “Anybody else who calls that a cut is lying.”
HB-1137 passed the House 70-0 and the Senate 31-2. Three lawmakers told KELOLAND News Thursday there’s been no second-guessing the changes to the sales tax rate and four-year expiration date.
“There is no truth to her statement. It is a reduction. Call it a cut, a reduction in the overall sales (tax) rate,” Democrat Rep. Linda Duba said. “We put a sunset clause on it because of the uncertainty going into the future.”
Duba, who represents District 15 in central Sioux Falls, was one of the 70 lawmakers in the House who supported HB-1137. However, she said she would not have supported the bill without the sunset clause. She said she hasn’t seen public outcry regarding the sunset clause.
“It is not a (tax) holiday. A holiday usually occurs for a short period of time,” said Duba, adding an example would be cutting sales tax on school supplies for a few months. “This is a reduction or a cut. We’re being very smart and fiscally responsible to monitor this over the next few years.”
Republican Sen. Casey Crabtree, who serves as the Senate Majority Leader, said he disagreed with Noem’s characterization of the bill regarding sales tax cuts.
“Republican Senators, since we’ve wrapped up this session, have heard overwhelming support for the results of the 2023 session including the largest tax cut in history,” Crabtree said. “The sunset (clause) is an insurance plan for the people of South Dakota and it allows us to keep this discussion going forward.”
Crabtree said other tax cut proposals — a property tax cut and cutting the sales tax on groceries — created numerous issues for lawmakers and that’s why those proposals fell short. Noem supported cutting the sales tax on groceries and testified in favor HB-1075.
“The legislature supported cutting the overall sales tax overwhelmingly with the exception of two Democratic Senators,” Crabtree said. “Everybody else in the legislature supported this.”
Republican Rep. Will Mortenson said House Republicans are very proud of HB-1137. The House Majority Leader from Pierre called it “a substantial tax cut.”
“I’ll tell you the House didn’t want the sunset (clause) on there. I think the Senate wanted a different plan. I know the governor wanted a different plan. At the end of the day, none of us got exactly what we wanted,” Mortenson said. “I don’t think it was exactly what anyone wanted, but that’s the lawmaking process. We had to compromise to deliver this tax cut to the people and I think we’ll stand by it.”
Mortenson said he’s unsure what a second vote would look like if Noem ended up vetoing HB-1137. He praised the bill as being “broadly based and a fair tax cut.”
“Who knows if it’ll be vetoed,” Mortenson said. “In every case, we’ll cross that bridge when we get there.”
Repealing the Partridge Amendment part of HB-1137
Noem pointed out HB-1137 repeals what has been known as the Patridge Amendment, which dates back to 2016 when the state sales tax rate increased to 4.5% to increase teacher pay. The amendment called for the reduction of the sales tax by one-tenth of a percent for every $20 million raised by remote sellers tax.
Noem said the amendment, which has never been enforced by the state, calls for permanent tax cuts.
“The Partridge Amendment has been a confusing thorn in the side of the legislature and on legislative onlookers for years. It was drafted in a way that wasn’t entirely clear if it was a trigger and when it might go into place,” Mortenson said. “We really felt like we were honoring the spirit of that Partridge Amendment by reducing the sales tax overall.”
Duba said she could see calling HB-1137 “a partial repeal” when compared to the Partridge Amendment, but that doesn’t change the concerns for the future funding remain.
“If we can continue down this path and meet our obligations for all of the groups that need us: education, state workers, the elderly, the disabled, all the Medicaid, Medicare services that we provide. If we can continue to do that, we can continue to push out this sunset clause,” Duba said. “If we can’t, this gives us the opportunity to make sure that we continue to meet our obligations.”
Veto Day is set for Monday, March 27.