South Dakota homeowners looking for relief may be able to get some soon in the way of a property tax break. The state has passed two bills that will allow local municipalities to decide if they want to forego property tax collection in favor of a sales tax.
The legislation was apparently drafted after issues with inconsistent taxing across the state, including areas that saw their property values and, therefore, their tax liabilities go up after the pandemic. County officials will now have the ability to decide how to generate funds from homeowners, hopefully reducing financial burdens across the state.
So far, nearly a dozen different counties in the state have had conversations about making changes based on the new law, with Meade County leading the charge in adopting the change.
According to KOTA Territory, if these counties act fast, they could roll the new tax programs out as early as next year. Here’s what we know.
South Dakota’s State Senate Passes New Legislation to Help Homeowners
Legislation in South Dakota will put more power into the hands of individual counties when it comes to property taxes. According to KOTA Territory, this is thanks to Senate Bills 96 and 245, which allow each county to decide if it would like to generate funds through property taxes or a half-cent sales tax.
The decision comes after people in places like the Black Hills region (like Minnehaha and Lincoln counties) felt that they were paying higher tax bills after their property values went up post-pandemic. SB 96 and SB 245 will now allow each county to decide if they want to do away with property taxes on owner-occupied properties in favor of the sales tax, according to local radio station SDPB.
According to the publication, counties will only be able to do this if the sales tax is equal to a dollar-for-dollar exchange.
Property Taxes Play an Important Role in Communities
According to the Institute of Taxation and Economic Policy (ITEP), property taxes are one of the oldest ways that local governments generate income, which they then use to fund all sorts of different community amenities, including safety measures (like police and fire), public schools, and road maintenance.
When the 20th century first began, more than 80 percent of local tax revenue was generated through property taxes. That number has gone down over the years as new initiatives—like income and sales tax—have become popular alternatives.
But they haven’t gone completely away because property tax remains the most reliable way to fund local government, according to the ITEP. That’s because property values traditionally remain stable or grow, even during times of economic downturns, which can impact things like income and spending.
Of course, when it comes to cash-strapped homeowners looking for a break, spending a little bit more when you shop may seem more appealing than cutting a big check come tax time.