PIERRE, S.D. (KELO) — South Dakota’s 4.5% sales and use tax might be going down.

The state House of Representatives voted 66-3 on Wednesday to reduce it to 4.2 %.

HB-1137 now goes to the Senate for consideration. The Senate last year refused to accept the House’s plan to eliminate the state sales tax on food.

The current plan’s prime sponsor, Republican Rep. Chris Karr, called this year’s version the largest tax cut in the state’s history.

The tax reduction would save every man, woman and child in South Dakota an average of $116 the first year.

Karr said it would partially reverse the Legislature’s decision in 2016 to increase what then was a 4% rate.

He said that increase initially didn’t generate as much as expected. This year, he first proposed returning to the 4% rate. That would have cost an estimated $173 million in revenue. He then amended the decrease to 4.2%.

That change brought his proposal down to approximately the same potential reduction of state revenue as the grocery-tax elimination that Governor Kristi Noem had proposed.

The House Appropriations Committee chose Karr’s proposal over the governor’s on Tuesday.

“We’re estimating this is going to be 104 million dollars of tax relief, 104 million dollars that we won’t be putting into our coffers, but it could be less than that,” Karr told House members on Wednesday, “because we are putting more dollars back in our economy, more dollars back in the hands of our taxpayers.”

He said the Legislature’s Joint Committee on Appropriations, of which he’s a former co-chair and is still a member, estimated that the state treasury will receive about $390 million more in revenue for the current budget year that ends June 30 than the committee had initially thought a year ago.

Democrat Rep. Linda Duba was one of the three nay votes. The others were Republicans: House Speaker Hugh Bartels and his deputy, Mike Stevens. Duba said the decision on the tax cut should wait until after state government’s budget is decided for the coming fiscal year that starts July 1.

“The tax break is 116 dollars a person. That equates to two dollars and 23 cents a week. It might be something — it probably will help some families, but I think most of us would not feel 116 dollars in one year,” Duba said.

House Republican leader Will Mortenson recalled the billions of dollars of federal relief that flooded into South Dakota during the COVID-19 pandemic starting in 2020. He said the sustained growth of the state’s economy helped convince him the cut can be afforded this session.

“Two years ago we were here, we saw a tremendous amount of revenue. A lot of it was from the federal government. What did we do about it? We distributed it. Were we in a position to cut taxes? I didn’t think so. I thought, Boy, we’re here because of the federal government dumped a whole bunch of money on us,” Mortenson said.

“We came back last year. What did we have? Double-digit revenue growth again. A couple of tax cuts. At least one passed off of this floor. We seriously considered tax cuts. I think I stood right over there” — he pointed across the chamber to where he sat last year — “and talked about how it wasn’t the right time. I wasn’t confident we could afford it. I thought it put too much risk on our obligations.

“I’m here to tell you today folks, we’re going to take care of our obligations, we’re going to fund education, we’re going to fund Medicaid providers, we’re going to pay our state employees what they’re worth. We’re going to do those things.

“And we hear from the advocates, we hear from the tax spenders all the time,” he said. “We need to remember the taxpayers.”