End the Food Tax
in South Dakota

 Dec.20, 2024 News flash: Kansas' food tax will end Dec.31!  

 Aug.1, 2024 News flash: Oklahoma ended its state's food tax today!  

Sorry to report: SD lost its opportunity in 2024 to end the state's food tax. 

  It was Initiated Measure #28 on the November ballot. It had widespread, strong support early in the campaign, but opponents created wild interpretations claiming it would also take tax off many other items, even for cities. Thus, voters were persuaded to oppose the measure. 

It was only 2 sentences, explicitly excluding cities, contrary to opponents' claims.

Title: An Initiated Measure Prohibiting Taxes on Anything Sold for Human Consumption

"BE IT ENACTED BY THE PEOPLE OF SOUTH DAKOTA: That Title l0 be amended by adding a NEW

 SECTION to read:

Notwithstanding any other provision of law, the state may not tax the sale of anything sold for human consumption, except alcoholic beverages and prepared food. Municipalities may continue to impose such taxes."

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How to word it so there will be no question of intent and no problem with the Streamline Sales Tax Agreement:

The rate of tax imposed by SDCL 10-45 on retailers upon the gross receipts of all sales

of food and food ingredients and by SDCL 10-46 on the use, storage or consumption in

this state of food and food ingredients is zero percent.

Commentary after the vote

      The measure’s language was imprecise, but all the petitioning and campaigning for it had been only about food, so the legislature could have stuck with the well-understood intent of the measure. They could even have covered the state revenue for it by moving the general sales tax rate back to 4.5%, as the governor intended in 2023. It's already scheduled to revert back in 2027 anyway. 

   The Streamline Sales Tax Agreement, which is important for our state revenue from taxing online sales, explicitly allows states to have a lower tax rate, "even zero percent on food", different from the general sales tax rate. The legislature has the authority to enact a food tax cut this way, removing the state's portion of the food tax, but leaving it for cities. This is how seven other states have zero state tax on food but still have local tax. 

      We still must do the right thing, and stop our state from taxing groceries. No one should have to pay a tax to eat.

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WHAT TO KNOW about taking state sales tax off groceries:

---  Funding is available. Here's the obvious source. The general rate cut 4.5-to-4.2% was a temporary cut. The general rate could go back to 4.5%. That way those same funds can cover for cutting the state’s food tax to 0%, which was one of the choices (the governor's) for these funds in 2023 anyway. (Cities would still have 2% on food and everything.)

You'll love the Dec.2004 pie graph in the download section below.

     Before the sales tax rate cut, just before the pandemic, several of us did a man-on-the-street-type survey of over 700 SD’ans. Like every other poll on this, it showed a strong public preference for cuts to the grocery tax rate over the general rate. Now, with IM28 we have the opportunity to vote Yes for the food tax cut that SD households want and need.

---  Among the 11 states still taxing food, South Dakotans pay the 3rd highest food tax. (SD was 4th highest last year, but Oklahoma ended its food tax Aug.2024.) Now only Tennessee and Mississippi have more state tax on food. Alabama has begun to phase down its food tax. Only Mississippi and South Dakota apply their full sales tax rate to groceries.

---  Economic growth.  SD’ans shop outside our borders due to our grocery tax, and they buy more than food while there. Our SE corner has no grocery store, but a Fareway store at the first exit in Iowa is popular with South Dakotans. A man once started a grocery in the SE corner, but it closed in a short time. He said, “Every day people asked me about the tax.”

-- In general, families benefit more from the food tax cut, rather than the 3/10% cut in the general rate. People can buy used furniture and clothing, but they cannot buy used food. There is a limit to how much families can economize on food before degrading health and children's ability to learn.  

--- Food insecurity. Thousands of South Dakotans are food insecure. Research shows that every percent off food reduces food insecurity. 

     Food for babies and children is essential for their growth and development and our future health and productivity. 

--- South Dakota is one of the states recognized as having the most unfair tax systems, with taxes proportionately harder on those least able to pay, and easier on those most able to pay. The tax on food is the most regressive part of sales tax.

---  Over the past 20 years you have been paying higher tax on your groceries in order to make it possible for South Dakota to tax online sales. Back in 2003, tax rules were changed to follow "sales tax streamlining" rules to allow for taxing online sales, but the collateral damage was an increase in the food tax, only food. Some legislators said back then that they would cut the food tax when the state finally receives this new revenue. By now South Dakota has receiving millions in revenue from taxing online sales. So by now the legislature should have recognized the sacrifice that grocery shoppers have made for this and should have started reducing the food tax. Some tried.  But helpful bills have not made it through the Legislature.

---  In every survey where the public was asked its choice between each 1/10% off the general rate versus each 1% off groceries, there has been a strong preference for the grocery option. The Legislature would be honoring the public's will and the need by cutting the grocery tax.

---  Some opponents tout SD's “broad based” tax structure. Not to worry. When tax comes off food (leaving it for cities), South Dakota will still be taxing many goods and services that are not taxed in a number of other states. SD will still be taxing our home heating bills, the labor (not just parts) on our car repairs, fitness club memberships, newspapers, Wheelchair Express transportation, and children’s music lessons. There will still be sales tax on phone bills and an extra 4% if it’s a cell phone. Even without groceries, SD will still have a broad tax base, including many basic services.

--- There is more tax on a loaf of bread than the farmer gets for the wheat in it; more on a box of cornflakes than the farmer gets for the corn.

--- SNAP (formerly called food stamps).  Some legislators have claimed there’s no problem because low-income people get SNAP, and SNAP purchases are not taxed. However, only 8% of South Dakotans receive any SNAP benefits, even partial allotments. (Ave $48/week/person) Therefore, South Dakota's low-income people are buying food with cash also and being taxed to do so. 

-- Refund programs do not work. South Dakota tried a food tax refund program for eight years. It missed the majority of eligible low-income South Dakotans.

-- How much is your own family's food tax? Multiply the total weekly cost of your family's food by 3.224. That's how much you would save over a year without the state and city food tax. To find out how much you would save with the state portion off: (52 weeks x .042 sales tax rate = 2.184 weeks worth of food, or 46 meals)

-- No other tax so directly takes food off the family table.” -Matt Gassen, former long-time Director of Feeding South Dakota
    In families with limited budgets for food, the grocery tax is taking food off tables! With the state’s portion of the grocery tax over a year, everyone could buy the equivalent of 46 additional meals for their families, or use the savings for other necessities.
    Hunger in South Dakota: According to Feeding South Dakota, One out of every eight South Dakotans is food insecure. These are our neighbors who lack access at times to enough food for an active, healthy life. They have limited or uncertain availability of nutritionally adequate food and often make trade-offs between other basic needs and adequate food. Part of their scarce income goes for the tax. Taxing groceries is only one of the causes of hunger in our state, but it is one.

---  It’s the right thing to do. We don’t tax food for horses, pigs and pheasants, because they are an “input to production” But we tax food for workers, babies, children. Aren't these an input to production too? 

   South Dakotans ended the tax on medical services and outlawed paying to use toilets. You don’t pay a tax before you can vote or before you can breathe. No one should have to pay a tax before they can eat.

---  What about the “Partridge amendment”? Some legislators are recalling a promise in 2016 to put the 4.5% general sales tax rate back down to 4%, called the “Partridge Amendment”.  But there was a previous promise. In 2003, SD eyed the millions of revenue lost by not taxing online sales. To win the Wayfair court case and get to start taxing online sales, certain tax rules forced the food tax --only food-- to go up. Rather than compensate with a state rate cut on food, some legislators said then they would cut the food tax when the state finally receives revenue from online sales. They didn’t put it in statues, like Partridge did, but this food tax cut is still deserved, and the time has certainly come. For 20 years we have been paying more for groceries so that the state can tax online sales. Now a cut to 0% on food would gives as much tax relief as the Partridge amendment. Thus, with such a tax-switch, both promises can be fulfilled. [See story "A Tale of Two Promises" in the downloads at the bottom.]

---  One previous public vote:  In 2004 ending food tax was a ballot initiative that lost. The measure included no revenue replacement, and opponents warned of exaggerated dire consequences, so much so that it was impressive that over a third of the people voted for the initiative. [See the church ladies' state budget pie graph below.]

* Historic note and recent history:

  Over the past 20 years you have been paying higher tax on your groceries in order to make it possible for South Dakota to get revenue by taxing online sales. Back in 2003, tax rules were changed to follow "sales tax streamlining" rules to allow for taxing online sales, but the collateral damage was an increase in the food tax, only food. Some legislators said back then that they would cut the food tax when the state finally receives this new revenue. Now South Dakota is receiving millions in revenue annually from taxing online sales. Thus, by now the legislature should have recognized the sacrifice that grocery shoppers have made for this and should have started reducing the food tax.

     Some tried. Recent history: A bill in the 2022 legislature passed the House by a vote of 47 to 22. But alas! The bill died in the Senate, 9 to 22.  In  2023 Senate vote passed a food tax cut that died in the House.

If you like more historic detail, read the attached page “A Tale of Two Cities.” 

-- Special note to people from Rapid City, Mitchell, Spearfish, Pierre, New Underwood, and Wentworth, please read the historic note and the attached page “A Tale of Two Cities.” Your food tax has gone up the most in order for the state to get new revenue by taxing online sales. You might have the most reason to complain about the food tax not coming down while new state revenue has been coming in.

You shouldn’t have to pay a tax before you can eat.

This info from Bread for the World-SD, advocating for ending food tax since 1992.
BreadSD@gmail.com

In the downloads below, the pie graph was made by church ladies in 2004.