Charging sales tax on food purchases is regressive by nature but is especially unfair to low-income South Dakotans who already spend a disproportionate amount of their income to meet basic needs, two prominent South Dakota economists said.
Eliminating the sales tax on groceries could help alleviate some of the financial pressure on lower-income families that already struggle to pay for housing, transportation and other basic needs, the two economics professors said during a June 3 online panel discussion hosted by South Dakota News Watch.
The regressive nature of South Dakota’s sales tax, where all consumers rich or poor pay the same tax rate on goods and services, including food, is in part preventing the state’s lowest earners from reaching financial stability, the professors said.
South Dakota is one of three states that still tax groceries at the full state sales tax rate, according to the Center on Budget and Policy Priorities. Sixteen other states tax groceries, but at a lower rate than the general sales tax. Sales taxes in South Dakota generate more than $1 billion annually and provide about 60% of the state’s general fund revenues.