What you need to know about Gov. Kristi Noem's proposed sales tax cut on groceries

Gov. Kristi Noem announced Wednesday she's proposing a permanent tax cut on the sales tax for groceries.

Noem said if reelected governor in November, this would be a major policy proposal during her budget address in December.

South Dakota is one of only three states that continues to apply the full sales tax rate on citizens at the grocery store on food purchases. But this isn't the first time the tax on food has been in the spotlight for the state. During the 2022 legislative session, lawmakers proposed two bills targeted toward cutting taxes, and one of those bills specifically targeted the grocery tax.

Here's what we know about the proposal so far:

More:Gov. Kristi Noem proposes permanent tax cut on groceries

What is Noem specifically proposing?

Noem's proposal would fully eliminate the 4.5% state sales tax at the grocery store.

Ian Fury, a spokesperson for the governor's reelection campaign, said while the state sales tax would be axed, the proposal would not touch local sales tax.

"The governor is not telling cities what taxes they can and cannot levy," he said.

Anyone who shops at a grocery store would be impacted by the tax cut, Fury added.

During the announcement, Noem reiterated that if passed by the legislature, the sales tax cut would be the largest tax cut in the state's history.

"I am promising we will repeal the grocery food tax on all grocery items in the state of South Dakota, so we can bring relief to our families," she said during the announcement Wednesday, flanked by blue and yellow signs that read "cutting taxes, saving families."

How much money would go back into South Dakotans' pockets?

Noem said the tax cut would be worth more than $100 million.

During the past year, consumers have been hit hard by inflation, supply chain issues, the war in Ukraine, lingering effects from the COVID-19 pandemic and earlier in the spring, a bird flu epidemic that impacted the Midwest.

More:Amid inflation, Sioux Falls grocers look for deals to retain customers

Noem took time during the announcement to target President Joe Biden, saying that his policies were part of the reason South Dakotans and their pocketbooks were "hurting."

By proposing the tax cut, money could go back to families, so they could afford a new winter coat or shoes for their children, Noem said.

South Dakota lawmakers have tried cutting grocery sales tax before

South Dakotan lawmakers across both parties have sought to do something about the regressive sales tax on groceries for years.

It's considered a regressive tax because low-income families and individuals tend to pay a higher share of their income in taxes, according to the South Dakota Budget and Policy Project.

While South Dakota, Mississippi and Alabama to apply the full sales tax rate to groceries, there are 13 states that tax groceries at various rates.

Most recently, during the 2022 legislative session, Sen. Reynold Nesiba (D-Sioux Falls) introduced legislation that would eliminate the sales tax on food, something he's been working on for the past decade. Ultimately, the bill was voted down.

In the House of Representatives, Rep. Chris Karr (R-Sioux Falls) had introduced a bill to lower the sales tax from 4.5% to 4%, but that bill did not address the full sales tax on groceries. While it had support in the House, it failed in committee in the Senate.

Noem has also been hesitant to throw her support behind either measure, fearing a tax cut could lead to a tax increase in the future if the state's economic success faltered, according to prior Argus Leader reporting.

"The legislators are a little bit more bullish on what revenue will look like in two or three years, and I'm probably a little more cynical than that," Noem said in February, citing concerns of rising inflation and the war in Ukraine. "It's going to be a challenge in the coming years."

What happens next?

Noem has to be reelected in November for her tax cut proposal to make it into her budget address. She faces Democratic state Rep. Jamie Smith, who was part of a group of lawmakers in the winter who supported the elimination of the sales tax on food.

Lawmakers in Pierre then have to write the language for the tax cuts and vote on it.

The election is Nov. 8. Smith has called Noem's move politically motivated.

"I think our governor's afraid of losing an election and she's going to do anything she can to ensure that election, and one of the things was going back on something she hasn't supported in the past," Smith said over the phone Wednesday.

This article originally appeared on Sioux Falls Argus Leader: Gov. Noem wants to cut South Dakota's grocery sales tax: what to know