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Food tax refund to be spent on food

South Dakota State Roundup

May 1, 2004

Food tax refund to be spent on food

Gov. Mike Rounds' plan to exempt some lower-income families from the state food tax was passed by the Legislature in early March. It could go into effect later this year.

South Dakota has a 4 percent sales tax on groceries. Rounds' program would refund taxes paid on purchases by families with incomes at or below 150 percent of the poverty level, or $27,600 a year. The state estimates a typical family would be refunded about $28 a month.

The plan would ask families to spend the benefits only on food, and they would have to apply quarterly for eligibility. The size of the refund will be determined by the participants' food expenditures, tracked through a debit card system similar to the federal food stamp program.

Some legislators said it would be expensive to administer the program and that the state should just cut 1 percent off the food tax instead. Others proposed phasing in an elimination of the food tax all together.
Proponents said the intent was to provide relief to working families. In the end, the bill passed 69-1 in the House.

Prior to the bill's passage, the tax was expected to bring $41 million this year to the state, $18 million to cities and $800,000 to tribes.

Joe Mahon