Fiscal impact is focal point at Vote South Dakota forum on so-called grocery tax measure
Sep. 20—MITCHELL — A hotly contested initiated measure to repeal the state's so-called grocery tax was among the highlighted ballot issues debated on Thursday night at the Vote South Dakota candidate and issue forum at the Sherman Center at Dakota Wesleyan University.
Initiated Measure 28 — the proposal to eliminate the state's tax on consumables — was in the crosshairs, with disagreement on how far the proposed change would go to affect the budgets of the state or municipalities. The initiated measure is titled to prohibit taxes on anything sold for human consumption. It would not affect the taxes on alcoholic beverages or prepared food.
Dakotans for Health co-founder Rick Weiland spoke in support of the measure, which was initiated to the ballot by citizen signatures. The aim is only to prohibit state sales taxes on groceries but the impact can vary depend on how "human consumption" is defined. That phrase is not defined in state law, according to the South Dakota Attorney General's office.
A Yes vote approves the initiated measure and changes state law, while a No vote leaves state law as is.
The representatives of the two sides also argued the wide disparity that the South Dakota Legislative Research Council pointed out with its updated fiscal impact note on IM 28 earlier this year. A narrow definition would reduce state revenues by an estimated $133.6 million. The broader interpretation would result in an estimated revenue loss of up to $646 million, which would be a large chunk of the state's annual $7.3 billion budget. The Attorney General explanation on the ballot says "judicial or legislative clarification of the measure will be necessary."
Weiland said a broad reading is not consistent with what signers of the initiated measure petitions were considering.
"It is (limited to food)," he said. "That's what the fiscal note that the voters saw and what is on the petition that they signed said. And that would become the law of the state when this passes. This whole idea of $646 million and $335 million in services, there was nothing in the fiscal note for services."
Weiland said, if the measure is approved, that municipalities would have the chance to tax anything sold for human consumption because it is a new, superseding law. Language that says "municipalities could continue to tax anything sold for human consumption" is on the ballot.
"That's how this works. ... This is affecting the state's tax on groceries. Not the municipalities. We have honestly a difference of opinion. You're going to go in the voting booth and you're going to see the attorney general's explanation, you're going to see our language and you're going to see the fiscal note that says that municipalities can collect tax and it's $123 million because it's being taken off of food, not toilet paper."
South Dakota Retailers Association Executive Director Nathan Sanderson spoke in opposition of the measure, saying it's a poorly written proposal that would blow a huge hole in the state's budget without a plan to replace the revenue.
"Whether it's $123.9 million, which is the low end of the LRC estimate gave a year ago or $646 million, either way, we're talking about at least $100 million in lost revenue to the state of South Dakota with no plan for making it up. Our organization believes this is going to lead to significant cuts to education and health care. Or it's going to lead to higher tax increases, for things like property taxes which pays for education or a state income tax."
Sanderson said the $646 million figure from the latest analysis shows there are unintended consequences with the proposal.
"It's very clear that this isn't just limited to food," Sanderson said.
The South Dakota Municipal League, which also opposes the measure, has issued an analysis that indicates that the state's cities and towns would collectively lose at least $51.5 million in sales tax revenue each year, with the smallest municipalities being impacted by ranges of 40 to 59% reductions.
While Sanderson warned about the potential budget problems, Weiland pointed out there are $1.4 billion in sales tax exemptions in the 2025 state budget, representing agriculture, health care and tourism. He said there's always good intentions from lawmakers in Pierre to do something to change the tax but "they never seem to get done in Pierre."
"There's pipeline sales tax exemptions. ... There's sales tax exemptions for bull semen and rodeo clowns," said Weiland, the former Democratic Party nominee for U.S. Senate in 2014. "We're talking about families in South Dakota that are struggling. I don't agree with Gov. (Kristi) Noem on much, that should not be a surprise. But I certainly agreed with her on this and she decided after a career of opposing it, she was going to support it."
Sanderson pointed out this proposal was different from Noem's plan, because the governor planned to retain the state's taxing authority but lower the rate to 0% on "food and food ingredients," Sanderson said.
Jim Terwilliger, Noem's top budget official as commissioner of the Bureau of Finance and Management, told South Dakota News Watch that Noem doesn't support the ballot initiative because of concerns about the wording. He added that the governor "still believes a repeal of the grocery tax is the best tax relief for South Dakota families if it is done in a responsible manner."
"We can have a conversation about what that number really is but cutting $100 million out of the state of South Dakota's budget is going to lead to one of two things: it's going to lead to programmatic cuts to things like education and health care or it's going to lead to tax increases," Sanderson said on Thursday night. "We don't think that's the right fit for South Dakota."
Vote South Dakota is a partnership including South Dakota News Watch, South Dakota NewsMedia Association, South Dakota Broadcasters Association, and South Dakota Public Broadcasting. The group is a media response to provide voters with accurate information and civic discourse around ballot issues, sharing information and stories ahead of the election.
About 100 people in attendance on Thursday night heard about constitutional amendments regarding abortion, open primaries, Medicaid work requirements, an initiated measure regarding recreational marijuana and a referred law regarding carbon pipeline regulations. The audience also heard from incumbent Republican Kristie Fiegen, who is running for another six-year term on the South Dakota Public Utilities Commission. Her opponents, Libertarian A. Gideon Oakes and Democrat Forrest Wilson, were invited but were absent from the forum.
Absentee voting is now open in South Dakota and the voter registration deadline is Oct. 21 before the general election on Nov. 5.
