Working on real property tax reform

Five years ago, I was told by the Department of Revenue that the drastic increase in property taxes was an anomaly. Unfortunately, we now know that wasn’t the case. 

Since then, many of us in the legislative body have worked on this problem, not just for our own constituents, but for all South Dakotans. Whether you live East River or West River, whether you’re a retiree on a fixed income living in a $300,000 home, or a young professional family with two incomes and kids around the kitchen table, housing affordability matters to every one of them.

Across the country, leaders—including President Donald Trump—have talked about the three major drivers of housing affordability: interest rates, taxes and insurance.

This week, we as a legislative body will have the opportunity to address one of those factors right here in South Dakota—property taxes. Homeowners have watched their property taxes climb rapidly as assessments rise. For many retirees and young families, the concern is no longer hypothetical, it is real! SB 245 will be on the House floor Monday for a vote. It provides targeted relief for owner-occupied homes so South Dakotans can afford to stay in their homes and continue building their lives here.

This is not a new tax! Five years ago, this Legislature approved a reduction in the state sales tax from 4.5 to 4.2 percent—a 0.3 percent decrease. That reduction was temporary and is scheduled to sunset in 2027, which means the sales tax rate will automatically return to 4.5 percent. A constituent noted that, “South Dakota has been heavily reliant on property taxes to cover services that are used by a large percentage of folks who don’t pay a dime!”

So, what will SB 245 do? SB 245 simply ensures that when the rate returns to 4.5 percent on June 30, 2027, the additional 0.3 percent in revenue does not disappear into the general fund.

Instead, this bill creates a dedicated Property Tax Relief Fund.

That fund would be used to help offset property taxes for owner-occupied homes across the state, helping South Dakotans afford to remain in the homes they worked so hard to build.

How much will this cost the consumer? The same it will cost him July 1, 2028 when the sunset clause expires, which works out to about 3¢ on every $10 spent, 30¢ on $100 spent and $3 on $1,000 spent. In a state without an income tax, protecting primary residences from excessive property tax increases is both fair and necessary.

If the bill passes it will go to the governor for signature.

This bill, SB 245, is on the House floor this week, and as you read this column, it may have already been decided. Last week we passed SB 96, the companion bill to SB 245. This bill will give the counties the ability to assess up to a half cent. This tax will offset the county’s budget thereby reducing our property tax. The counties do not have to opt in, but it is a resource available to them now if needed. This bill is headed to the governor’s office for signature. 

In closing, I want you to know that many of us have rolled up our sleeves and have worked very hard to try to achieve real property tax reform and I am hopeful that SB 245 will pass and head to the governor for signature.