UPDATE: South Dakota lawmakers have urgently introduced at least 28 bills targeting property tax reductions in the ongoing legislative session, which began earlier this month and runs until March 2024. This surge of proposals aims to address the mounting pressure from skyrocketing property taxes that have risen nearly 70% in the past decade.
As lawmakers scramble to find solutions, Governor Larry Rhoden has backed a significant initiative allowing counties to implement a half-percent sales tax to fund property tax relief. This proposal follows the recommendations from the Legislature’s Comprehensive Property Tax Task Force, which suggested 19 proposals last October, many of which have yet to be introduced.
Democratic leaders have confirmed plans to introduce their own property tax relief proposals soon, signaling a significant push for reform. Senate Assistant Majority Leader Carl Perry (R-Aberdeen) expressed the challenges ahead, likening past property tax reduction attempts to a game of “Whack-A-Mole.” “It’s going to be tough to get things exactly right, but we’re going to work at it,” Perry stated.
The urgency of this issue is underscored by the fact that South Dakota’s state government primarily relies on sales taxes, while counties and schools depend heavily on property tax revenue. With property taxes continuing to climb, elected officials are feeling the heat to provide meaningful relief.
One of the proposed solutions, introduced by U.S. Representative Dusty Johnson, aims to utilize funds from a scheduled increase in the state sales tax rate to alleviate property tax burdens. In 2023, the Legislature reduced the sales tax from 4.5% to 4.2%, with a scheduled return to 4.5% in 2027.
Amid this backdrop, Senate President Pro Tempore Chris Karr (R-Sioux Falls) has introduced a bill to maintain the 4.2% sales tax rate, arguing that raising it could worsen the financial strain on taxpayers already facing high property tax assessments. “No matter how bad we want property tax relief, that’s not right,” Karr emphasized, comparing the proposed funding mechanism to a feudal system.
Last year, the legislature enacted a comprehensive property tax relief law that capped residential assessment growth and expanded eligibility for relief programs. However, concerns persist about the limits imposed on local government revenue growth, which could inadvertently harm existing homeowners.
In a recent hearing, Heath VonEye, deputy city administrator for Harrisburg, highlighted that the current cap restricts community growth, leading to a projected $3 million revenue loss from 2027 to 2031 if the cap remains at 3%. Raising it to 5% could recover about $800,000 for the city, helping fund essential services.
Numerous bills are currently moving through the legislative system, including: Senate Bill 85, which would mandate elections for schools exceeding property tax limits; House Bill 1168, providing property tax credits for private school expenses; and Senate Bill 118, which proposes allocating $100 million annually from state sales tax revenue to a homeowner tax rebate program.
Despite the flurry of proposals, not all efforts have succeeded. Senate Bill 99, which sought to transition education funding from property taxes to sales taxes, failed to pass a committee vote. Critics argue that attempting such sweeping changes may create more complications than solutions.
The situation remains dynamic as South Dakota’s lawmakers continue to navigate the complexities of property tax reform. With pressures mounting and numerous proposals on the table, attention now turns to how these legislative discussions will unfold in the coming weeks.
Stay tuned for further updates as this urgent situation develops.
