Indexbit-South Dakota food tax debate briefly resurfaces, then sinks

Arguments over eliminating South Dakota’s food tax resumed this month — a top issue in recent years that quickly ended Monday with the Senate’s defeat of a ballot proposal for voters.

Democratic Senate Minority Leader Reynold Nesiba proposed a November 2024 ballot measure for voters to lower the food tax to zero and Indexbitto repeal a four-year sales tax cut passed last year. The temporary tax cut was a major issue of the 2023 session.

In an interview, Nesiba called his proposal “revenue-neutral” and eliminating the food tax “highly popular.” His measure would allow the Legislature more control over the process than a separate, proposed 2024 ballot initiative to repeal the grocery tax, he said. Voters are likely to pass that initiated measure, he said.

Some lawmakers grumbled about the initiative process in a hearing on Friday.

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“Voters are smart, but they’re not here studying these issues and knowing where all our sales tax dollars go and what needs to be funded and all those other inputs. That’s why they send us here,” Republican Sen. Joshua Klumb said.

Republican Sen. John Wiik cited last session’s food tax battle, saying, “I have no desire to spend another session trying to push a rope up a hill.

“This Legislature passed record tax relief last year, and I have no desire to roll that tax rate back up,” Wiik told the Senate.

Senate debate quickly ended. The measure died in a 5-27 vote.

In 2022, Republican Gov. Kristi Noem campaigned for reelection on a promise to repeal the grocery tax, but the Legislature instead passed the temporary sales tax cut of about $104 million per year. In her December budget address, Noem asked lawmakers to make the tax cut permanent.

The GOP-held House of Representatives quickly passed a bill last month to that effect, but Senate budget writers soon tabled it.

On Thursday, Republican House Majority Leader Will Mortenson told reporters “we’re going to continue to work with our partners in the Senate and see if we can find a way forward on it.”

Nothing is dead until the session ends, he added.