PIERRE, S.D. (KELO) — Gov. Larry Rhoden says giving county governments the local option to add a half-percent of sales tax would reduce property taxes in those counties that choose that path.
The Republican governor outlined his proposal on Monday to Capitol reporters.
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He wants state lawmakers to allow counties to levy a sales tax for the first time and have that revenue dedicated to reduce the county’s tax levy on owner-occupied property.
Some legislators have proposed county sales taxes in the past. “I would say it was met with not very much support. That’s why the property tax system was set up in the first place — it was to be the funding source for counties,” Rhoden said.
The governor said his proposal would mean a 21% reduction in current property taxes on a $325,000 owner-occupied home if adopted in Minnehaha County and a 22% reduction in Pennington County.
KELOLAND News asked Rhoden whether the greater evil was a sales tax increase or property taxes.
“It’s not a tax increase. It is supplanting property tax dollars with a sales tax, at the option of the local government, their choice,” Rhoden said.
His approach would allow a county to tax purchases including by people from outside the county.
His lieutenant governor, Tony Venhuizen, while still a legislator, had proposed earlier this session a statewide sales tax increase as a way to reduce property taxes. The House prime sponsor changed after Rhoden selected Venhuizen to be his second in command.
The Venhuizen approach also intended to tax purchases, including by people from outside South Dakota.
Rhoden, after he became governor in mid-January, brought property-value legislation that was developed with a group of 10 legislators. Lawmakers eventually passed Senate Bill 216, which calls for capping growth of property values, limiting growth of property taxes and expanding income thresholds for people age 65 and older to qualify for property-tax assessment freezes.
Rhoden’s new proposal of a county-tax option will be presented to the Legislature’s new task force that will study property taxes later this year. He discussed it with the Legislature’s leadership on Sunday night.
Two of the governor’s Cabinet members, Finance Commissioner Jim Terwilliger and Revenue Secretary Mike Houdyshell, accompanied him to the news conference on Monday.
Terwilliger will have a seat on the Legislature’s property-tax group. Former Rep. Kirk Chaffee, a retired Meade County director of equalization, will represent the governor. Directors of equalization determine property values in each county.
The 16 legislators on the task force haven’t been publicly announced.
Rhoden said that, if legislators approve his plan, a county commission’s decision to adopt a sales tax could be referred to a county-wide vote. He said a county sales tax also could be initiated by voters in that county if his plan becomes law.
The Legislature’s tax-study resolution includes the statement that “responsible stewardship requires a thorough review of government spending at both the state and local levels to identify inefficiencies, redundancies, and non-essential expenditures that contribute to an excessive tax burden on homeowners.”
According to the state Department of Revenue’s most-current annual report, more than $1.6 billion of property taxes were levied in calendar year 2023. Those included:
22.53% ($365,459,648) from agricultural property
43.11% ($699,352,214) from owner-occupied property
31.11% ($504,713,597) from other property such as businesses
