Despite the threat of veto, Gov. Kristi Noem has signed a bill temporarily reducing the overall sales tax rate in South Dakota.
Noem signed House Bill 1137 Tuesday, referring to it as a "tax holiday" rather than a tax cut.
The bill reduces the state's overall sales tax rate from 4.5% to 4.2%. It includes a sunset clause ending the cut after four years.
Both the governor and many lawmakers were vocal about cutting taxes going into the 2023 legislative session amid a large budget surplus. However, the debate over exactly which tax to cut became one of the dominant issues of this year's session.
Three major proposals were considered. One eliminated the state sales tax on food, another cut the overall sales tax rate, and the third delivered a rebate for owner-occupied dwellings.
Noem backed the grocery tax cut proposal. The plan was one of the tentpoles of her reelection campaign.
When the dust cleared in Pierre, HB 1137 was the last proposal standing. The bill was backed by House Republicans, who called it the most "responsible" way to provide tax relief. Senate Republicans voiced concerns about the long-term financial implications of a tax cut, noting the state's budget has been boosted by temporary coronavirus relief funds from the federal government. In the waning hours of the session, lawmakers agreed to a sunset compromise, making the cut temporary.
Noem indicated she was considering vetoing the bill, maintaining that a grocery sales tax cut would be better for South Dakotans. She also expressed concern over the sunset clause in the bill. She reiterated that sentiment in her press release announcing the signing of HB 1137.
“Our people deserve permanent tax relief. The legislature has instead offered them a tax holiday for four years,” Noem said. “It is clear they wish to raise taxes again in the near future, and the method through which they have written this legislation allows them to do so without ever having to take another vote.”
Despite this, Noem signed the bill, saying South Dakotans "deserve relief from burdensome regulations and inflation inflicted by the federal government."
"Public sentiment has shown that South Dakotans want a permanent tax cut. The legislature has failed in that regard, but I promise to continue to work with them in the future to do what is right for our state," Noem said.
The governor signed the bill one day after approving the overall state budget bill.
