South Dakota's Controversial Ballot Measure: Exempting All Consumables from Taxation

South Dakota is grappling with a contentious ballot measure that aims to eliminate the state's sales tax on all products intended for human consumption, including tobacco. This proposal, known as Initiated Measure 28 (IM 28), has sparked a heated debate among lawmakers and citizens alike, with concerns raised about the potential impact on state revenue and the unintended consequences of such a sweeping tax exemption.

Shaking Up the Tax Landscape: The Implications of IM 28

Tobacco Tax Exemption: A Surprising Twist

The primary focus of IM 28 is to remove the state sales tax on food and other consumable items. However, the wording of the measure has raised concerns that it may also eliminate the taxation of tobacco products. Republican House Majority Leader, Will Mortenson, has expressed his worries about this potential outcome, stating, "I don't know that that was the intent of the sponsors, but the way they drafted it makes it clear that we wouldn't have any taxes on tobacco, whatsoever."This unexpected twist has sparked a debate about the true intentions behind IM 28. Supporters of the measure, such as Rick Weiland, the backer of the food tax ballot question, argue that the language is clear and that tobacco should not be considered a "consumable" in the same way as food. Weiland asserts, "Tobacco isn't a consumable—in terms of a food product. You don't consume it to live."

The Fiscal Impact: Balancing Budgets and Essential Services

The potential loss of revenue from the elimination of the state sales tax on food and other consumables is a significant concern for South Dakota lawmakers. The state expects to generate $124 million in revenue from this tax in the upcoming fiscal year. Additionally, the state's tobacco tax is projected to bring in $42.5 million, further compounding the potential budget shortfall.These revenue losses could have far-reaching consequences for the state's essential services, such as education, healthcare, and public safety. House Majority Leader Mortenson warns, "Sales and use tax is the primary source of revenue for the state. Mortenson worries the tax cut will affect budgets for schools, nursing homes and law enforcement."

Navigating the Legislative Landscape: Potential Revisions and Challenges

The Legislative Research Council has advised the backers of IM 28 that the original proposal may be "overly vague," and has recommended a rewrite of the ballot question to clarify the scope of the tax exemption. This suggests that the measure may undergo further refinement before it is presented to voters.However, the path forward is not without its challenges. Supporters of the food tax repeal have faced resistance from the Republican-controlled legislature in the past, and the current debate over the potential tobacco tax exemption may further complicate the issue.

The Broader Implications: Shifting the Tax Landscape

The outcome of IM 28 could have far-reaching implications for South Dakota's tax landscape. If approved, the state would become the only one in the country to completely exempt tobacco products from taxation, a move that could set a precedent and potentially influence similar efforts in other states.Moreover, the broader impact on state revenue and the ability to fund essential public services is a significant concern. As Mortenson notes, "Sales and use tax is the primary source of revenue for the state. Mortenson worries the tax cut will affect budgets for schools, nursing homes and law enforcement."The debate surrounding IM 28 highlights the delicate balance between providing tax relief to citizens and maintaining the necessary resources to support vital public infrastructure and services. As South Dakota grapples with this complex issue, the outcome of the ballot measure will undoubtedly have far-reaching consequences for the state and its residents.