PIERRE, S.D. (KELO) — Republican Sen. Lee Schoenbeck was asked his thoughts Tuesday afternoon, after the House Appropriations Committee endorsed a state sales-tax cut proposed by one of its members, rather than two other tax-reduction plans.
The Senate’s president pro tem didn’t show his cards. “Looks like there’s going to be one vehicle. What’s riding in the vehicle in three weeks is to be seen,” he said.
The House of Representatives reinforced that perception Tuesday afternoon, when allies of Governor Kristi Noem couldn’t muster enough support to force the appropriators to release her proposal to take the 4.5% state sales tax off groceries, a plan she had announced during her fall re-election.
In fact, during the committee hearing Tuesday morning, the panel’s chairman, Republican Rep. Mike Derby, told the governor that the House Republican caucus had already taken a position to instead support the plan from Republican Rep. Chris Karr to reduce the state sales tax to 4.2% across the board.
That would partially reverse the half-percent increase the Legislature adopted in 2016 at the urging of then-Governor Dennis Daugaard to provide better pay for K-12 educators and provide some property-tax relief. Record sales-tax revenues the past two years, and projections of a surplus exceeding $300 million for the current fiscal year ending June 30, mean those funding increases don’t need to be reversed.
Karr’s bill also would repeal a never-enforced amendment that said the sales tax rate should gradually be reduced back toward 4% as revenue rose.
“I told my committee earlier,” Derby said to the governor, prior to the panel deciding 8-1 to set her bill aside, “this is the biggest votes (sic) that I’ve ever taken in my nine years in the Legislature, and I mean that. We don’t take it light-hearted.”
He continued, “As chair of appropriations and our appropriations team, we try to provide our caucus with as much information as we possibly could this session. We have forty-percent new members in our caucus, and we felt it was incumbent upon us to make them as smart as possible on all the issues, and I believe we’ve done that. The caucus did take a position, as you’ve heard on the previous bill.”
Derby told Noem that his personal preference was a third option to reduce property taxes on owner-occupied homes by $300 apiece, which was the next to be heard. “But my position is to be a leader and take the caucus position, and move that (Karr’s bill) down the road,” he said.
Based on the refusal to resurrect her bill, the House will likely approve Karr’s bill, HB-1137, on Wednesday afternoon and forward it to the Senate.
Noem of course wasn’t giving up. She had issued a news release on Monday about a poll that one of her campaign committees commissioned suggesting widespread support for the grocery-tax repeal. And she referred to that poll in a variety of ways when she testified Tuesday.
The Republican governor also warned Tuesday that a ballot measure being circulated by a group headed by Democrat Rick Weiland calls for the grocery tax to be repealed. She said that, given the support found for her proposal, Weiland’s would pass too in November 2024 and possibly put the Legislature in a tighter strait.
What happens now isn’t clear. The Senate stopped a general food-tax repeal that the House passed last year. The defeat of Noem’s bill Tuesday might have put that genie back in the bottle, at least for a while.
In the Senate, the lead sponsor of Karr’s bill is Republican Sen. David Johnson, a member of the Senate Appropriations Committee. Whether they have the oomph to get it through the Senate in the next three weeks remains to be seen.
If not, these final weeks of the 2024 session might end in a deadlock, with no tax cut at all.