VIEWPOINT | There's a simple solution to South Dakota's property tax dilemma

Guest column by Rep. Will Mortenson

Property taxes are irritating. The tax notice comes in the mail twice a year, showing that you owe the county treasurer hundreds, thousands, or (if you’re lucky and own very valuable property) tens of thousands of dollars. You pay property taxes, even though you may have bought your house, farm, or business 50 years ago and paid off the mortgage 20 years ago. Because of the stark, high-dollar reminder and the fact that no transaction has taken place, property taxes represent more of a burr under South Dakotans’ saddles than about any other tax.

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So, if we do not like property taxes and we want to pay less of them, how should we go about doing that? It is important to know that the state of South Dakota, your state government, does not spend one dime of property tax revenue.

All property taxes are allocated to local governments, with about 90 percent spent in three areas: law enforcement, schools and roads. The dollars are not going to some faceless paper-pusher; property taxes fund your teachers, sheriffs, city streets, and rural bridges. So, any real, responsible plan to reduce property taxes must replace the revenue instead of recklessly suggesting that our schools, cities, or counties simply cut their staff or their road budget by 25 percent.

The good news: a simple, straightforward solution has already been proposed. Last year, I co-sponsored a bill that would have cut owner-occupied property taxes by 35 percent for all homeowners without defunding the police, our schools or our roads. The replacement revenue was an increase in the sales tax rate by 0.8 percent, moving us from 11^th lowest in the nation to 18^th lowest, and making our sales tax rate the same as North Dakota (still 1 percent lower than Nebraska).

Despite the support of a couple dozen smart conservatives in the House of Representatives, the bill was opposed by Gov. Larry Rhoden, the Democrats and House leadership, and was defeated. If it had passed, the property taxes on your home would be lower by more than one-third in 2026. Remember that when the notice comes this spring.

A consumption tax like the sales tax is the best replacement revenue. It is fair and consistent across the state. It allows frugal, conservative spenders to avoid paying some taxes, if they are willing to consume less. Another benefit: out-of-staters pay sales tax, from truckers passing through to visiting tourists to out-of-state corporations buying goods and services in South Dakota.

While it may only account for 10 or 15 percent, tens of millions of dollars would be paid by out-of-staters in sales taxes that are now paid 100 percent by South Dakota homeowners in property taxes. Owing to that fact, the property-tax-for-sales-tax swap represents a clear and substantial tax cut for South Dakotans.

The best solution for reducing property taxes is a simple, responsible one that replaces property tax revenue without defunding vital local services. This summer, ideas have been floated, ranging from a state income tax to new county taxes to putting a 16.2 percent tax on eggs and bread (that last idea is proposed to go in our constitution).

Reducing property taxes for South Dakota homeowners can be achieved, but not at the expense of our law enforcement, not on the backs of our teachers and not through income taxes or 15 percent taxes on groceries. If we are going to deliver property tax relief and tamp down the irritation of that semiannual tax notice, we need to keep it simple, South Dakota.

Will Mortenson is a Republican lawmaker from Fort Pierre who serves in the South Dakota House of Representatives. Representing District 24, he’s a rancher, attorney and former House Majority Leader.