PIERRE, S.D. – The South Dakota Senate on Wednesday sent a property-tax relief plan to Gov. Larry Rhoden after a sharp debate over whether the measure would help homeowners or shift more tax burden onto other South Dakotans.

Senators voted 20-13 to concur in House changes to Senate Bill 245. Two senators were excused.

The bill creates a homeowner property tax reduction fund in the state treasury. It transfers $55,896,576 from the general revenue replacement fund into that account on July 1, 2026. Beginning July 1, 2027, revenue tied to the state’s expiring 0.3 percentage-point sales-tax reduction would also flow into the fund. The money must be used to reduce the local effort for general education levies on owner-occupied single-family dwellings.

Supporters say bill gives homeowners relief

Supporters said the bill would provide relief for homeowners where valuations and tax bills have climbed.

“This provides statewide relief, it delivers more relief to the places that are hurting the most because of the way it’s proportioned, and it spreads the tax base for the way that we fund education,” Sen. Jim Mehlhaff, R-Pierre, said. 

Mehlhaff also rejected the argument that concurrence amounts to a tax increase.

“Concurring with this resolution does not raise taxes 0.3 percent. When the sunset comes off, taxes will go up. That ship has sailed and it’s gonna happen,” Mehlhaff said. 

Sen. Taffy Howard, R-Rapid City, said lawmakers failed to make the lower sales-tax rate permanent and should now use that revenue stream to help homeowners.

“The tax is going back to 4.5. Accept it and move on. Am I happy about that? No. But I would much rather have that increase go to help fund education to a greater degree and in the process help homeowners,” Howard said. 

Howard said many homeowners are struggling to absorb large tax increases.

“When you have a 40 percent increase in taxes, not in assessed value, in taxes paid in four years, we have people who are struggling to stay in their homes,” Howard said. 

Opponents call plan a tax shift

Critics argue the bill unfairly burdens non-homeowners with costs.

“We’re going to cherry pick and give it to just some people, the people that are fortunate enough to own their own homes, the folks that rent and pay property taxes via their landlord, the ag, we’re not touching those, we’re picking winners and losers here, and we’re taxing everybody to do it,” Sen. Chris Karr, R-Sioux Falls, said. 

Karr also warned that tying relief to sales-tax revenue could create problems in a weak economy.

“So in a bad year, if sales tax fluctuates, it goes down, we have negative growth, what moves? Well, the property tax relief would either have to go down, levies would have to increase,” Karr said.

Sen. Casey Crabtree, R-Madison, said the bill would send the biggest gains to high-value homes while asking other South Dakotans to help pay for it.

“We should be calling this the Ted Turner tax shift, because that’s who’s gonna get the big wins. It’s the one percenters, and you know who’s gonna pay for that? Hard-working South Dakotans, most of it coming from our farmers and our ranchers,” Crabtree said. 

Crabtree said lawmakers still had time next year to revisit the issue before the sales-tax change takes effect.

“We still got one more legislative session to work through those things to find the right results to make sure that we’re doing things the right way,” Crabtree said. 

The bill now goes to Governor Larry Rhoden for his consideration.