PIERRE, S.D. (KELO) — Property tax has been a source of government revenue in South Dakota since before statehood. Now a legislator from rural Pennington County is talking about repealing the residential property tax altogether — and replacing the revenue by more than doubling the state sales tax.
State Representative Tim Goodwin, a Republican from the Rapid City area, floated the idea in his latest weekly column. He is challenging Senator Julie Frye Mueller, also from Rapid City, in the June 7 Republican primary.
The problem with Goodwin’s proposal is that his suggested sales-tax increase would raise enough to replace all property tax, including on agricultural and commercial property, rather than just for residential.
Goodwin wants to raise the state sales tax from its current 4.5% rate to 9.5% or 10%. Each 1% would generate about $300 million, he said, and property taxes collected in 2021 totaled nearly $1.5 billion.
“The advantage of this tax shift, called a ‘consumption tax,’ means we are only taxed on what we consume, and another advantage is that our 13-1/2 million tourists would contribute more. In visiting with business owners, particularly those in the tourism industry, they felt a dime (10%) state sales tax would have minimal, if any, effect on their business. In visiting with homeowners, they overwhelmingly supported this tax shift. So, there you have it,” Goodwin wrote.
Goodwin told KELOLAND News on Tuesday that he hadn’t yet attempted any legislation on his idea. He wants feedback to know what constituents think about it. “This is a radical change and I put it out there as a way to end property tax. I need to hear from them now,” he said.
South Dakota’s property-tax system is complex. Frye-Mueller unsuccessfully attempted several pieces of property-tax legislation during the 2021 session.
As for Goodwin’s concept, Frye-Mueller said, “The idea of a consumption tax has been discussed by other legislators in the past. Analysis was done in the 2022 session to remove property taxes and increase sales tax. However, no formal action was taken on the issue.”
Frye-Mueller said she would “definitely” want public input on Goodwin’s concept “and we would need to make sure no tax was added or increased without the removal of property taxes.”
The winner between Frye-Mueller and Goodwin in the June 7 Republican primary election will win the District 30 seat in the Senate, because no other candidates filed.