PIERRE, S.D. (KELO) — Senators killed a bill Friday that would have reduced South Dakota’s state sales and use tax to 4% over two years from the current 4.5%.
“Not one friend of mine has ever said, ‘Hey, when’s that sales tax going to go from four-and-a-half to four percent?’ Not one,” said Senator Lee Schoenbeck, R-Watertown.
Schoenbeck was in the House in 2016 when lawmakers increased the sales tax by one-half percent to provide property-tax relief and raise teacher salaries in K-12 schools and technical institutes. He fought for the increase: “I never broke kneecaps like I did to help get that through,” he said Friday.
The $150 million ongoing cut that the House wants would boomerang on lawmakers and hurt state government, Schoenbeck warned, saying there will be “a predictable fiscal cliff when this federal firehose of cash turns off” as the COVID-19 pandemic winds down. South Dakota received more than $8 billion in federal coronavirus aid that went to governments, businesses and families.
“The victims” according to Schoenbeck are going to be South Dakota’s small schools, nursing homes and state employees. He said a fiscal conservative ought to be talking about the overcrowding problems at the men’s and women’s prisons and the juvenile and regional-jail issues.
Those comments didn’t land well with many of the representatives and senators in the room who weren’t on the committee. “Now the games begin,” Representative Liz May, R-Kyle, growled as she walked past Schoenbeck after the bill’s defeat.
The prime sponsor, Representative Chris Karr, R-Sioux Falls, went through a list of strong economic indicators for South Dakota. “This takes a responsible look at how do we reduce this,” Karr told the committee.
Senator Brock Greenfield, R-Clark, was one of more than a dozen legislators who spoke in favor of Karr’s bill. Greenfield told senators they could add a trigger that would stop the rollback if voters approve expand Medicaid eligibility this November. “One way or another we owe it to the people to give them the tax relief that was promised,” he said.
Lobbyists representing school teachers, school boards, school administrators and school districts spoke against the cut. So did South Dakota Retailers executive director Nathan Sanderson, who served on then-Governor Dennis Daugaard’s senior staff when the tax increase went through.
“As it comes to this bill, what we’re really talking about is the difference in philosophy between on-going revenues versus one-time revenues, and I would submit to you that the bulk of what you’re seeing right now are one-time revenues,” Sanderson said.
Replied Karr, “I don’t have a crystal ball. I don’t know what ten years out looks like. Three years ago we didn’t know that COVID was going to hit us either. Nobody know what the future is for sure, but a reasonable person can look at this and say, ‘Our economy is good.'”
Senator Casey Crabtree, R-Madison, said that while this committee was looking at a statewide sales-tax reduction, at the same time the Senate Taxation Committee was looking at letting counties charge up to a half-percent of sales tax to pay for jails and treatment centers. “How about we just stay steady? I think that’s why people like doing business here,” he said.