The House Taxation Committee voted 10-2 Tuesday morning to advance legislation that would eliminate school-related property taxes on owner-occupied single-family homes and replace that revenue with a two-step increase in the state sales tax.
The bill would set the general education and special education mill levies to zero for owner-occupied properties. To replace that revenue, the state sales tax would rise from 4.2% to 4.7% on July 1, 2026, then to 5.0 percent on July 1, 2027
The change would apply to school levies; county and municipal property taxes would still apply.
Rep. Tim Czmowski, R-Lincoln County, the bill’s prime sponsor, told committee members the proposal aims to deliver homeowner relief while building a more stable funding stream for what legislators call the “big three” — K-12 education, state employee compensation and Medicaid providers.
Czmowski said the relief would be significant.
“It provides funding for meaningful owner-occupied tax relief in the sum of 29 percent to 44 percent on a statewide average, which is a decrease per home of 29 percent to 44 percent, which is obviously meaningful,” he told the committee.
Czmowski said the bill is designed so a share of new sales tax revenue supports ongoing pay increases for school employees, state workers and Medicaid providers. During testimony, he also described property taxes on owner-occupied homes as having increased sharply since 2015, citing his own research.
The Bureau of Finance and Management testified in opposition. Derek Johnson, representing the bureau, said property tax growth is not uniform across the state and questioned whether HB 1308’s stated intent language would be enforceable.
“However, that’s not an enforceable mechanism, that’s just an intention stated within law,” Johnson said.
House Taxation Vice Chair Rep. John Hughes, R-District 13, Sioux Falls, said he typically opposes tax increases but supported sending the bill to the House floor for broader debate.
“And although I don’t like tax increases in general, and it disappoints me that we’re not looking at exemptions, but be that as it may, I’m gonna support this bill. And I think we need to have the floor debate,” Hughes said.
The committee voted 10-2 to advance HB 1308.
HB 1312 deferred to 41st day
The committee also considered House Bill 1312, sponsored by Rep. Kathy Rice, R-Black Hawk, which would limit annual valuation increases on owner-occupied single-family dwellings and provide an exemption for mill rate limitations on taxing districts.
Rice told lawmakers homeowners have seen double-digit valuation increases in recent years and said her bill would add “guardrails” by tying allowable growth to inflation measures.
After debate, Rep. Will Mortensen, R-Fort Pierre, moved to defer HB 1312 to the Legislature’s 41st day. The committee approved that motion on a 9-3 vote, effectively killing the bill for the session unless revived later under legislative rules.
HB 1319 tabled
In brief action, the committee also tabled House Bill 1319, sponsored by Rep. Mike Weisgram, R-Fort Pierre. Weisgram told the committee the proposal — dealing with provisions related to tax increment financing districts — would be handled through a Senate amendment to a broader bill.
The House Taxation Committee meets again on Thursday to hear additional property tax measures ahead of next week’s crossover deadline.
