Noem signs temporary tax reduction into law, vows to fight for permanent tax cut

After weeks of veto threats, Gov. Kristi Noem signed what some have called the “largest tax cut in state history” into law Tuesday.

The move reduces the state sales tax from 4.5% to 4.2%, cutting an estimated $104 million from state revenues in the first year of implementation. But the tax cut has a sunset clause in 2027 — something Noem has opposed.

Lawmakers had just hours left in their annual legislative session earlier this month when they hashed out details and compromised on the tax cut.

Noem criticized legislators even as she signed their bill.

“Our people deserve permanent tax relief. The Legislature has instead offered them a tax holiday for four years,” Noem said in a statement. “It is clear they wish to raise taxes again in the near future, and the method through which they have written this legislation allows them to do so without ever having to take another vote.”

Noem said the tax cut isn’t “the best way” to help South Dakotans at a time of high inflation, but she said a temporary tax is “better than none.” The tax cut will go into effect July 1, which is the standard date for new state laws to become effective. It will expire in 2027 unless legislators extend it.

“Here, my honor and good sense require me to continue to fight for the permanent tax cut the people have earned,” Noem said.

During her fall reelection campaign, Noem promised to eliminate the state sales tax on food, which would have been a $102 million cut. South Dakota is one of a few states that fully taxes groceries. Noem had recently threatened, without using the word “veto,” to withhold support for the state budget after lawmakers rejected her food tax repeal. But she signed the budget Monday.

Meanwhile, petition circulators unconnected to Noem are gathering signatures to put a repeal of the state food tax on the ballot next year. Noem is a Republican, and a food tax repeal has traditionally been a Democratic priority in the state.

Noem’s signature on the tax cut bill is one of her last major decisions before legislators convene on Monday to consider her vetoes.