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Senate Republicans offer recession trigger on tax cut before final legislative day

Conference committee on reducing the overall sales tax rate
Lee Strubinger
Conference committee on reducing the overall sales tax rate

In the battle over tax cuts, Senate Republicans are proposing a fourth option on the overall sales tax reduction.

They want to protect state revenues in the event of a recession.

Senate Republicans are labelling it a recession trigger.

The proposal says if the state sees about $15 million in revenue loss from the prior year the trigger will go into effect. The last time that happened was in 2010. Lawmakers had to cut state budgets as a result.

Republican State Senator Ryan Maher says Senators are trying to avoid those cuts, especially as federal covid stimulus money dries up and the state sees increased costs.

“Because we know we’re going to have a lot of the ARPA money leaving the economy. We’re bringing two prisons online. We know Medicaid expansion is coming on and that’s going to cost us money. And there’s a potential repeal on food tax coming. So, we’ve got five different things that are going to happen that are going to affect our revenue in big ways.”

Maher is including the potential for a recession. He says there’s a high potential there will be no tax cut this year.

House Republicans are iffy on the proposal. Representative Chris Karr says lawmakers are elected to make tough decisions.

“If something major happens economically is that the best time to automatically raise taxes on the citizens of South Dakota automatically?” Karr said. “No. There needs to be a thought process. That’s why we’re elected to come here and think through this and go ‘How do we address this? What’s the impact on the state as far as state services. And what’s the impact on the people that live here and we’re collecting taxes from? Because if we’re hit that hard, the folks at home are going to be hit just as hard or harder.”

If the 4.2 percent reduction goes into effect, a person spending $100 would save 30 cents compared to the current sales tax.

House and Senate lawmakers will hash their differences out during the final day of session.

Lee Strubinger is SDPB’s Rapid City-based news and political reporter. A former reporter for Fort Lupton Press (CO) and Colorado Public Radio, Lee holds a master’s in public affairs reporting from the University of Illinois-Springfield.