End the Food Tax
in South Dakota

Update 12-7-22

Look at your grocery receipts, and think what you could have bought with that tax. Or, think what other way would prefer to have used that money?

Now that the election is over, it’s time to hold the governor to her campaign promise to end the food tax. Some state legislators called for a special session to be held before the election, but that didn’t happen. So the next step is for the legislature and governor to work together in the 2023 legislature to get it done.

The governor promised to end the state’s portion of the tax (4.5%). Of course, it would be helpful to end the city portion (usually 2%) also, even tho' that is more complicated.

Is it in governor's proposed budget?: In her budget speech on Dec.6, the governor stuck with her campaign promise to end the state's portion of the food tax. She says her financial people say the state has enough ongoing new revenue to do it. She asked the legislators to help her get this done. Now we’ll watch for bills in the legislature.

What to do: We can all think about households struggling to put food on the table, especially this winter with higher costs on housing and heat as well as on food. If you can, donate to help to them to Feeding South Dakota or local pantries and agencies in your city.
We can remind state legislators that we expect action on cutting the food tax. You could mention it when you send them a holiday card.

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

It's time to end South Dakota’s grocery tax. We have been pointing out for 30 years that this tax hurts South Dakotans. In families with limited budgets for food, the grocery tax is taking food off tables!

$$: It seems the state now has the funds enough to consider a tax cut. The first tax cut should be on groceries! As legislators promised years ago when the food tax was going up, once the state gets sufficient funds from taxing online sales, the food tax can come down. That time has come.*


-- Revenue has grown sufficiently, especially from taxing online sales, so that we can end this unfair tax without affecting current state programs. (The governor's finance people assure her the state can afford this. Also, Appropriations committee members are the watchdogs of the money. They put in bills to end the state's 4.5% food tax last session, so they must think the funds are available.)
Even if legislators
can agree on taking only 2% off in the 2023 legislature, that would be a significant down payment on ending the tax.


-- Several states have used a phase-down method to end or reduce their food tax. Examples: GA, SC, NC, and WV ended their state food tax. Food tax in Arkansas and Missouri is now less than 1.5%. Every % off food helps. A recent study shows that even one percent off groceries reduces food insecurity .


-- Other states: 36 states and DC do not tax groceries. SD is one of only 3 taxing at the full rate with no offset. (Alabama, Mississippi, SD) Wyoming ended food tax all at once and even reimbursed cities for their portion, so there is no city food tax either.
Notably,
none of SD’s neighbor states tax groceries, so SD loses businesses and loses tax revenue because South Dakotans often shop just outside our borders where food is not taxed.


-- How much is SD's food tax revenue? The SD Dept. of Revenue generally estimates food tax at 9% of sales tax, which is only one source of state revenue, albeit a major one. In Feb.2022, the Dept of Revenue estimated $82.5million food tax. If that guess is right, that is 1.43% of the whole state budget. (A poster from 2004 on this is attached below, when it was 1/1%.) For the next fiscal year, July’23-June’24, which the legislature will discuss in the next legislative session, the Revenue Dept. estimates at this point that the state's food tax revenue will be $100million.


-- How much is your own family's food tax? Multiply the total weekly cost of your family's food by 3.38. That's how much you would save over a year without state and city food tax. (52 weeks x .065 sales tax rate = 3.38 weeks worth of food)


-- Consistent with the "streamlining rules," the state's 4.5% food tax could go to zero percent, with cities still taxing groceries. (2% in most towns).

Cities: Those rules also say each city may have only one sales tax rate, so they may not have a lower tax rate on food than their rate on non-food.


-- South Dakota is recognized as one of 5 states with the most unfair tax systems, taking a bigger share of income from struggling households than from wealthier ones. The food tax is the most regressive part of sales tax.


-- Refund programs do not work. South Dakota tried one for several years. It missed approximately 98% of low-income South Dakotans.


-- Food stamp(aka SNAP) purchases are not taxed (thankfully!). Does that solve the problem? No: Many low-income households do not get SNAP. Those who do are expected to buy some of their food with cash. Those who are able to increase their earnings enough to get off SNAP get a double whammy: No food assistance and now tax on all their groceries.


-- Food is a very big expense for nursing homes. They need this tax relief. (Curiously, nursing homes pay food tax, but hospitals don't.)


-- 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.


-- No one should have to pay a tax before they can eat.


* Historic note, recent history:

Over the past 18 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. Now South Dakota is receiving millions in revenue from taxing online sakes. 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. A bill in the 2022 state legislature passed the House by a vote of 47 to 22. But alas! The bill died in the Senate 9 to 22.


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

update 12/7/22

breadsd@gmail.com

map neighbor states food tax.png
poster real pie graphs, from 12'04.docx
foodtax buttons.jpg