Braver Angels debate weighs pros, cons of repealing state sales tax on food

Mar. 20—MITCHELL — Should South Dakota eliminate the food tax?

That was the basic question put forth to four scheduled speakers Tuesday night at Dakota Wesleyan University, where the second of three scheduled "Courageous Conversations" focused on issues such as the fairness of the current state tax and what it would mean to the state budget should a proposed initiated measure succeed at the ballot box in 2024.

The proposed initiated measure would repeal the state's 4.5% tax on groceries, a change that has been proposed and championed in years past, including recently by Gov. Kristi Noem, though the proposal has always been shut down by the South Dakota Legislature. The tax cut, which would remove the tax on anything sold for human consumption with the exception of alcohol and prepared food, would cut an estimated $123.9 million annually from the state budget beginning in 2025.

If passed, the elimination of the tax would provide a monthly savings of around $40 per $1,000 spent on groceries in South Dakota.

The format of the debate used Braver Angels debate protocols and brought four speakers to address the audience, with two speaking in favor of the repeal and two speaking in opposition. Audience questions were welcomed at the conclusion of each speaker's comments.

Speaking in favor of the initiated measure were Rick Weiland, co-founder of Dakotans for Health, and Joel Allen, professor of religion and philosophy and director of the McGovern Center at Dakota Wesleyan University.

Weiland said the repeal of the grocery tax has been a goal for some time. One of the most recent attempts was in 2022, when it was voted down by a wide margin, despite support from the general public.

"Polling on the grocery tax (repeal) is averaging around 61% in favor. When Gov. Noem announced her number one campaign pledge, she was touting a poll of 75%," Weiland said. "So there is a ton of public support for this, yet Pierre hasn't been able to get it done. When that happens, organizations like ours see an opportunity to go out and collect signatures and turn it into a ballot measure. That's what we're going to be doing in South Dakota."

The specific ballot measure in question would allow South Dakota municipalities to continue their own tax on groceries, a substantial source of income for those towns and cities, should they so choose, Weiland noted.

He said the grocery tax puts a disproportionate burden on low income families. About 30% of those families' budget is put toward groceries, whereas families of greater means spend only about 7% of their budget on food.

"It is a target to help some people, which I think we all agree would be a good thing. We just have to figure out how to get it done," Weiland said.

The fact that the proposed ballot measure is an initiated measure as opposed to a constitutional amendment allows the legislature to make adjustments to the measure should it pass, Weiland said, giving some measure of flexibility to lawmakers on how the measure is implemented.

Also speaking in favor of the repeal was Allen.

He liked the idea of helping those of lesser means and felt there were a number of loopholes already in South Dakota tax codes that allow businesses and organizations to pay less in taxes than they would otherwise. He also noted that the loss of revenue would only make up a small portion of the overall state budget.

"I'm supportive, but I get a lot of the criticism. But at the end of the day this is only 1.4% of the overall budget. That's not a lot. And we already have many loopholes that add up to a billion dollars a year," Allen said. "It seems like we could end this without straining the budget too much."

With South Dakota and Mississippi being the only two states that tax food at their full rates, Allen said he planned to sign the petition in support of the initiated measure.

"I will sign the petition tonight, but with some concerns. I get the other side and I appreciate the very good arguments, but it does seem to me a doable tax. It's not a high bar to ask," Allen said. "I'd rather be a state that doesn't have this regressive tax."

Speaking on the opposing side of the repeal were John Wiik and Paul Miskimins.

Wiik, a state senator from District 4, spoke via video conference against the repeal.

He said responsible budgeting at the state level suggested the tax needed to stay on the books. South Dakota does not have the same revenue sources many of its neighboring states possess, and taxation must be looked at accordingly. When one tax source is taken away, a new source of funding must be found or services could be cut.

That brings up what is an uncomfortable term in South Dakota: a state income tax.

"North Dakota has an income tax. Minnesota is the land of 10 million taxes, not just 10,000. Nebraska — income tax. Wyoming has a ton of coal and gas, so they get free money just coming out of the ground. Iowa has an income tax. Montana has an income tax. That's really huge," Wiik said. "If you remove the grocery tax from South Dakota, it's opening the door for an income tax."

Wiik said most South Dakotans, when given the option of a grocery tax or a state income tax, the majority would prefer the grocery tax. Another way to make up the lost funds would be to raise the sales tax on everything else, an option that does not provide the same stability as the grocery tax.

He cited former Gov. Bill Janklow, who believed that if everybody is taxed a little, nobody is taxed a lot.

"That's what we're about. The tax system in South Dakota is incredibly fair, incredibly open and as long as the sales tax on food is part of it, we will continue to maintain fairness for everybody," Wiik said.

Miskimins, who served District 20 in the South Dakota House of Representatives, said he was essentially neutral on the issue of the grocery tax itself. But responsible governing means that a new source of income would be needed to replace the estimated $129.3 million that would be lost from the grocery tax.

"I am neither for or against the sales tax on food. I'm for responsible government and responsible spending for the taxpayers of this state," Miskimins said. "If we choose to do this, I'm fine with that, but we need to have a replacement for that."

The ups and downs of the economy need to be considered, Miskimins said. Inflation has affected the cost of services and support, which makes careful budgeting more important than ever.

"Technology, health insurance, government salaries, equipment for the state, roads and bridges have all inflated at a rate faster than our economy is growing. The concern is not for this moment, it's when that peak hits where we can no longer pay for the needs of the people of South Dakota. We don't want to be in a position like 2009 or 2010 where they had to cut the budget 10% across the board," Miskmins said. "That hurt everybody in the state of South Dakota."

Finances are tricky in the best of years, he said, and balancing a budget the size of South Dakota's means it must be done carefully despite the best intentions of those who are looking to repeal the grocery tax.

"The concern is not that we don't have a heart or don't care about those for whom the sales tax is a burden, it's that balancing the budget and being responsible to the people of South Dakota becomes a tremendous challenge," Miskimins said.

Some members of the audience answered a request for questions and comments from Jeff Pospisil, who served as moderator of the event, including Steve Sibson.

Sibson said he saw both sides of the argument, but thought getting spending under control at the state level may provide an alternative to enacting a state income tax.

"If we eliminate this and replace it with an income tax, that's a nice argument, but I would argue that instead of looking to replace a tax, if this does succeed, let's look at reducing spending. Why do we not look at that? I've tracked the state budget for a long time, and I see a lot of tax money going to wealthy corporations for economic development reasons," Sibson said. "If they have enough wealth to run their own business, why are they getting money from the state? That's one area I would argue that we should look at — reducing spending instead of trying to replace a sales tax with an income tax."

Both Weiland and Miskmins offered closing comments on their positions.

Weiland said, in the end, a heavy tax burden for low income families on something they need to live is not the path most South Dakotans would wish for. That includes both himself and the governor.

"I don't find myself agreeing with (Gov. Noem) on much, but we definitely agree that we should not be taxing people that need to eat because it's something everybody has to do. It shouldn't be gobbling up 30% of their budget," Weiland said.

Mikimins iterated that it all boils down to budgeting for him.

"We have to pay the bills for the state of South Dakota and serve the needs of the people of South Dakota," Miskmins said. "That's the biggest issue — trying to be responsible in a way that we achieve that balance in spending the funds for the people of South Dakota."

The next and final scheduled Courageous Conversations debate at Dakota Wesleyan University is scheduled for April 23. The topic for debate will be "Should South Dakota's constitution secure a woman's right to an abortion?"