Task force advances 18 proposals to reduce South Dakota property taxes

A January 2025 view of the South Dakota State Capitol in Pierre. (Makenzie Huber/South Dakota Searchlight)

A legislative task force aiming to reduce property taxes for South Dakota homeowners advanced 18 proposals at its final meeting on Wednesday in Pierre, setting up a potentially long list of bills for legislators to consider this winter.

The proposals include cutting state spending and applying the savings to property tax relief, replacing some property tax revenue with sales tax increases, using one-time tax credits for temporary taxpayer relief, and reserving a portion of future state revenue increases each year to reduce property taxes. Other recommendations include further restricting development incentives known as tax increment financing districts and requiring local public votes on school district decisions to raise taxes beyond state-imposed limits.

Lawmakers on the task force expressed a hope in June to propose legislation that will cut the average South Dakota homeowner’s property taxes by at least 50%. South Dakota property taxes paid by homeowners increased 38.8% between 2020 and 2024.

The task force started Wednesday with 26 potential recommendations resulting from earlier meetings, which were reduced to 18 that will likely be introduced as legislation this winter by task force members. 

South Dakota Retailers Association Executive Director Nathan Sanderson told task force members that the lengthy list points to a repeat of last winter’s legislative session, when more than 30 property tax proposals competed and only one, spearheaded by the governor, was signed into law. That law includes a five-year, countywide 3% cap on growth in owner-occupied home assessments, plus other provisions such as expanded eligibility for an assessment freeze program for elderly and disabled people.

“We’re not really driving toward any kind of consensus here,” Sanderson said. “We’re throwing a lot of things out there to kind of see what sticks, so I’m sure we’re going to be talking about this in March 2026 similar to the same way that we’re talking about it today.”

March is the final month of the legislative session, which begins in January.

Sanderson criticized a few ideas for their potentially negative impact on small businesses and South Dakota residents, adding that cuts to state government would be “incredibly difficult” to do without specific proposals.

He encouraged lawmakers to support a return of South Dakota’s state sales tax rate from 4.2% to 4.5% (the Legislature reduced the rate in 2023), dedicating the increase in revenue to property tax relief, which was proposed by Spearfish Republican Sen. Randy Deibert and forwarded by the task force. Sanderson estimated that the “relatively simple” solution would amount to $105 million of available relief for property taxpayers.

The few proposals that didn’t pass muster by the task force included removing some sales tax exemptions, such as exemptions on advertising, and an increase in sales taxes beyond a return to 4.5%. Rep. Will Mortenson, R-Fort Pierre — who’s not on the task force — submitted a column to the media the day before the meeting supporting a failed proposal from last winter to increase the sales tax rate to 5%, and use the extra revenue to reduce property taxes by an estimated 35% for homeowners.

Gov. Larry Rhoden has proposed an optional, half-percent sales tax for counties to replace a portion or all of their property taxes on owner-occupied homes. That proposal was not considered by the task force but could still end up as legislation introduced at the governor’s request. The task force also omitted consideration of a transaction tax proposed by former lawmaker Julie Frye-Mueller earlier this summer, which could appear as a citizen-initiated ballot question in 2026 and would be applied in addition to existing sales taxes.

SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX