Gov. Noem Announces Bill to Eliminate Sales Tax on Groceries

Gov. Noem Announces Bill to Eliminate Sales Tax on Groceries

 PIERRE, S.D. – Today, Governor Kristi Noem, Representative Mary Fitzgerald, and Senator John Wiik announced HB 1075, which will deliver the largest tax cut in South Dakota history by eliminating the sales tax on groceries. This proposal would put $102 million back in the pockets of South Dakotans.

“I’ve visited dozens of grocery stores across South Dakota in recent months, and every time, I meet South Dakotans who are shocked by the rising cost of food,” said Governor Kristi Noem. “They need relief – and we can afford to give it to them.”

In the last 2 years, the Consumer Price Index for “food at home” has risen 19%. This tax cut will counter that inflation in a direct and transparent way – consumers will see the impact on their receipt every time they go to the grocery store.

“Eliminating this tax will make it easier for South Dakota families to make ends meet, including my own kids and grandkids,” said Rep. Mary Fitzgerald. “As a former appropriator, I am confident that our state budget can afford this while still planning conservatively and responsibly for the future.”

A majority of states have cut major tax rates since January 1, 2021. South Dakota is an outlier as one of only 3 states that fully tax food.

“We hear a lot from special interest groups in the Capitol every year, but it’s time that we lobby on behalf of the taxpayer,” said Sen. John Wiik. “As we continue to shatter our state’s revenue records, legislators must ask ourselves, ‘how much is enough before we finally give it back to the people?’”

So far this fiscal year, ongoing general fund collections are up $146 million above the legislative adopted level. Governor Noem’s budget projects that this number will increase to $203 million by the end of Fiscal Year 2023, and her budget projects an additional $33 million in ongoing revenue growth in Fiscal Year 2024. With an additional $75 million in ongoing revenue available for last fiscal year, the state will still see $208 million in ongoing revenue even after this tax cut.

“Even with conservative projections for future revenue growth, we can afford this tax cut,” said Jim Terwilliger, Commissioner of the Bureau of Finance and Management. “The Governor has consistently provided large funding increases to schools, medical providers, state employees, and other groups. This proposal adds a group that is too often ignored – South Dakota taxpayers.”

The bill was introduced with 10 cosponsors, including 6 in the House and 4 in the Senate. The tax cut will not impact sales taxes collected by cities.

Governor Noem discussed eliminating the grocery tax in her State of the State Address; you can find those remarks here.

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23 thoughts on “Gov. Noem Announces Bill to Eliminate Sales Tax on Groceries”

  1. Not paying sales tax on groceries is something most people would say they would like. Who wouldn’t want to pay less in tax? However, there’s a reason the state hasn’t done this in the past. The last couple years of budget surpluses is likely only temporary. Eventually we revert back to the mean and we’ll have substantially less growth in tax revenue across South Dakota. When that happens, our Governor and legislators will be in a position where they struggle to increase teacher and provider pay, or even have to make cuts if/when revenue comes down. Over 90% of the current legislators have never had to govern this way — they’ve always had plenty of money to fight over and spend. That can and will end at some point — probably sooner than they realize. Cutting a sizable revenue source as a political move could be very dangerous for the long-term state budget. Of course, BFM can’t and won’t say that this year, but I bet they’re thinking it.

    1. Agree, half that suprluse was due to COVID dollars and other Federal Funding that allowed us to cut back on the sales tax spending. Yet alone, If I spend $100 on food, and pay the State $7 dollars, that is NOT much of a big savings to me in my mind. Think about it. The Republican and Democrat parties love to NOT tell the truth…I am afraid this may be the beginnings of the parties agreeing to institute a progressive income tax, whether that tax will be a capital gains tax, a corporate tax, or a personal income tax is yet to be seen. Knowing that we have a huge tax bill looming thanks to the liberals who supported Medicaid Expansion, this is very dangerous territory. IF I wanted to save $7 dollars, I would stop going to movies, buying alcohol, or tobacco, right?

      1. If I spent $100 on food, – You mustn’t have been in a grocery store lately. We budget $300 a week for our family of five and most of the time need to exceed that. If you can do math, that not $7 but over $1000 a year. That may not be a lot to you but would certainly help families like mine.

        1. I do not care what you spend on groceries, of course the bigger your family the more you spend a month. Again, for every $100 dollars it is only $7 dollars to the State, hardly an issue. Do the math, so if your budget for one month is $600 dollars, then you will pay $42 dollars. So what. You are crying over $42 dollars, seriously? I would suggest you cut out junk food, or eat out less, or go to movies less, or get rid of the soda, tobacco, or junk food. Cut your budget man.

          $50 in sales tax per month, is only $600 dollars a year from Food. The average family of four spends between $400 to $600 dollars per month on Food realistically when you take out all the soda, tobacco, junk food, and stick to whole grains, milk, veggies, and fruit.

          I am 50 years old man, been buying groceries for years.

          I am not upset at paying sales tax on food. I DO NOT, and will not ever support any kind of INCOME TAX.

    2. Teacher pay is already horrible with the tax in place so that reasoning doesn’t really work.

            1. So? You do know how incomes taxes work, right? Just like your federal taxes, states permit certain deductions which reduce your taxable income. For example, in ND the standard deduction is so large 60% of ND residents pay no state income tax.

              Even if the MN teacher is paying a couple of thousand dollars in state income tax, THEY STILL MAKE MORE MONEY than a SD teacher.

    3. I spent $100. Thanks for saving me $4.

      Schoenbeck is right. He will win out.

      Wiik doesn’t look great carrying a bill he no doubt didn’t support until Noem told him she supported it.

  2. This is a straight up giveaway of citizens tax dollars. The only way this works is you first pass a bill that permanently freezes grocery prices ( good luck ). Then you pass 4.5% grocery tax relief. This would give citizens a true 4.5% discount on purchases. The way this is proposed will result in a $100m giveaway with no real economic benefit. This money will disappear in the next round of inflation caused by Bidens Inflation reduction Act much like real wage gains have been destroyed. Cities and counties will also be affected by reduced tax collections. This $100m simply disappears with no real benefit. Our legislature needs to find more impactful ways to spend $100m.

  3. We can always propose a CORPORATE SALES TAX paid by those S.D CITIZENS who want to do business at places like AMAZON, WALMART, HOME DEPOT, McDONALDS any such MULTI NATIONAL CORPORATION – I oppose any form of income tax.

    BUT I am tired of people ruining Small Businesses, WE Should give S.D CITIZENS incentive to shop at Sunshine, and NOT Walmart or Franklin Food Market, not Walmart.

    WE need to give S.D Citizens incentive to AVOID AMAZON, and start going to Lewis Drugs, Robsons Hardware, and Local Suppliers.

    So, we can create 1.5% Corporate Sales Tax and charge it on those who shop at Multi-National Corporations.

  4. neighboring states which dropped their grocery tax are states which have a state income tax. there’s a bit of a slippery slope here which makes this bit of election pandering not fully without possible harm. really think about this.

  5. There is a ales tax rebate program for certain people already in SD. As stated above, medicaid expansion is going to quickly eat up any present surplus. The feds only subsidize this for a short time, then dump the cost on the state (me as a taxpayer). I doubt many people realize this. I wouldmuch rather pay a small amount on my purchases than have an income or corporate or some other new tax in the future.

  6. Yes the food tax provides a lot of revenue for the state but it’s the stability especially during a recession that makes it so important. Our SD tax burden is among the lowest in the nation because it’s very broad to make sure we don’t have whipsaws every year. CA is a perfect example. When times are good their coffers are full and they spend spend spend. Then when times are tough they still spend but their revenue goes off a cliff.If you want tax relief then take the half penny back off like you said you were going to do when we got all the new internet tax revenue!

  7. My understanding is that only honest-to-goodness nutritional food items will be exempt, and that everything else at the grocery — including pop and munchies and beer — will be taxed in full. Is this so?

    As for any loss of income to the state, the internet sales tax has been humming along for several years now. Initial estimates were that it would pull in the magic $100 million a year. Has all that been spent for other multi-year priorities?

    1. Your understanding is incorrect. HB 1075 would exempt all food and food ingredients, including pop and candy. The only items excluded would be alcohol, tobacco and cannabis products, and prepared foods.

    2. You are correct, HB-1075 should be amended to only include sales tax exemption on Whole Grains, Milk, Veggies, and Fruit. the Four Food Groups. Anything else, should be Taxed. Personally, I am against removing sales tax on Food at all. I have no issue paying $7 dollars for every $100 dollars of food I buy. I can cut my own budget elsewhere.,

  8. If Noem can’t get this passed, she can write off her national political aspirations. With all the pre-election ads she ran saying she was going to eliminate food tax, if she doesn’t, she’ll be branded ineffectual.

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