Current projections indicate South Dakota will see a nice surplus for fiscal year 2022 when those books close June 30.
And with that, it may be time for this state to finally embrace an idea that has been proposed for nearly 30 years and has recently been picking up steam: lifting the state’s regressive tax on food.
According to a report last week, the state’s revenues as of May were up $171.3 million so far for the fiscal year that began last July 1, representing a 9.6% increase from 2021. South Dakota Finance Commissioner Jim Terwilliger said the biggest gains have been the sales and use tax (+12%) and the state lottery (+9.4%), according to KELO.
If that rate holds up through June, it will mark the 11th straight fiscal year that state revenue has exceeded projections. Last year, the state was able to tuck $86 million into its reserve, WNAX reported.
Which brings us to the food tax, the repeal of which picked up momentum last session when, in the state House, several Republicans joined Democrats in voting to lift the state’s 4.5% tax on food purchases. The vote was 47-22, indicating broad support for an idea that has been swatted down by legislators since the 1990s and rejected by voters in 2004. However, the state Senate nixed the measure 22-9, then didn’t appoint a conference committee to deal with the proposal, thus killing it.
During last year’s House debates, it was estimated that the repeal would cost the state — or, if you will, save South Dakota consumers — about $82 million.
“The money is there. We can do this,” argued Rep. Jon Hansen, R-Dell Rapids. “It is prudent. It is responsible.”
But to no avail.
South Dakota is one of just 13 states that taxes food items. It’s considered regressive because it particularly hits lower-income households harder.
With South Dakota’s economy humming along — albeit with the help of COVID relief funds — it would seem time to finally lift this tax and give consumers a break.
It’s one that is particularly needed now, with inflation raising prices around the world and the Russian invasion of Ukraine further destabilizing the world’s food supply.
As Rep. Scott Odenbach, R-Spearfish, put it last winter. “If not now, when? If not us, who?”
Granted, there are uncertainties regarding the future — there always are — but lifting the food tax can reduce some of the burden on taxpayers, who will likely in turn spend that money on other items or services and add more to the state sales revenue. (This is particularly true among lower-income households, which generally have little choice but to spend that money, thus providing their own form of economic stimulus.)
South Dakota’s solid financial picture — which our leaders love to brag about — doesn’t mean a whole lot if lawmakers are unable or unwilling to put those benefits to good use for the people. This would be an ideal place to start, would it not?