South Dakota House debates property tax cuts and sales tax increase proposal

In a pivotal session of the South Dakota House of Representatives on March 10, 2025, lawmakers debated a significant property tax relief proposal aimed at providing substantial financial relief to homeowners across the state. The proposed legislation seeks to cut property taxes by 35% for owner-occupied homes, benefiting a wide range of residents, including farmers, ranchers, and city dwellers. This tax reduction would be funded by an increase in the state sales tax from 4.2% to 5%, aligning South Dakota's rate with that of neighboring North Dakota.

The proposal outlines that the owner-occupied general education and special education levies would be set to $0, effectively lowering property taxes by approximately $416.70 for every $100,000 of taxable value. For example, homeowners with properties assessed at $300,000 could see savings of over $1,250. The sales tax increase is expected to generate additional revenue, with proponents arguing that visitors to the state will contribute significantly to this funding.

During the debate, representatives expressed a range of opinions on the amendment. Supporters highlighted the immediate relief it would provide to homeowners, emphasizing the need to address the ongoing property tax crisis. They argued that the proposal is straightforward and offers a clear benefit to South Dakotans, particularly in light of rising property valuations.

Conversely, opponents raised concerns about the implications of shifting the tax burden onto sales tax, which they argued disproportionately affects lower-income residents and renters who may not benefit from the property tax cuts. Critics also warned that the increase in sales tax could lead to future financial instability for local governments and schools, as it relies on a fluctuating revenue source.

Ultimately, the amendment to the property tax relief proposal passed narrowly with a vote of 35 to 34, allowing the bill to move forward for further consideration. As the House continues to deliberate on this critical issue, the outcome could have lasting implications for South Dakota homeowners and the state's overall tax structure. The discussions reflect a broader conversation about balancing tax relief with sustainable funding for essential services, highlighting the complexities of tax policy in the state.