Initiated Measure-28, which aims to repeal grocery sales taxes, is ambiguous and raises many questions
Much as I deplore the tax structure that makes South Dakota one of the most regressive tax states (meaning that the wealthier you are, the smaller the proportion of your income goes to taxes) in the country, I’m dubious about the ballot measure (IM-28, fully titled “South Dakota Initiated Measure 28, Prohibit Food and Grocery Taxes Initiative”) in November that takes aim at this disparity. IM-28 is intended to eliminate sales taxes on “food and non-alcoholic beverages, which are perhaps the epitome of regressive taxation. Getting rid of them is a practical way to level South Dakota’s playing field when it comes to tax burdens, and IM-28 is about as well-intentioned as can be.
So why am I dubious about the measure? Because IM-28 is just too ambiguous for its own good.
Grocery taxes, according to Gov. Kristi Noem’s figures (which she used when she promoted the repeal of those taxes during her 2022 re-election campaign) accounted for $102.4 million dollars in FY 2024. I believe if that were an accurate figure, that voting those taxes out would be an easy choice for voters. Noem certainly got some political mileage with her proposal in ‘22.
Trouble is, Noem’s numbers on the cost to the state don’t seem to jibe with a range of estimates (some go as high as $646 million) that are being bounced about in the rhetorical hullabaloo over this issue. Why the ambiguity? Because the measure, as written, leaves some important definitions out. If you read the ballot measure, you’ll see that IM-28 “prohibits the State from collecting sales or use tax on anything sold for human consumption,” with alcohol and prepared food being the only exceptions.
Seems straightforward enough, but there’s some wiggle room in the language.
The non-partisan Tax Foundation’s critique, which focuses on the measure’s ambiguities, says “Whether cigarettes and other tobacco products will be given tax-free status under the proposition is itself unclear and debates about this are ongoing. The text does not define, for example, “prepared food” or “human consumption.” Is a cigarette consumed, or does consumption mean only to eat or drink? Or are some tobacco products, like vapes and cigarettes, consumed while others, like chewing tobacco, are not consumed because they are not inhaled or swallowed? Of course, these are very specific questions, but they are exactly the types of questions that will arise as businesses and government officials respond to the measure. When other states have exempted groceries, they’ve spent considerably more than two sentences spelling out the policy details to avoid precisely these ambiguities.”
To me, the most debate-worthy words in this measure are “human consumption.” There is no definition of the phrase in this measure, which I believe takes for granted that the words apply only to products that are eaten or swallowed as liquids (ex-alcohol), an assumption that can be called into question, if not shredded altogether, by focusing on the definition of “consumption.”
The very definition of “consumer” says it all: A consumer is one who utilizes economic goods, not exclusively food and beverages. The state Attorney General’s explanation of the measure notes that “human consumption is not defined by state law. However, its common definition includes more than foods and drinks.” For example, don’t we consume household cleaning products? And what about soap? And lawn fertilizer, paper towels, furniture polish, and so on and on? Those products aren’t food, but they’re certainly consumed by humans. And then there’s the definition of “prepared food,” which the AG says is defined in state law as “food that is sold heated or with utensils.” So how do pre-cooked meat products like, say, salami, which are essentially prepared, stack up in the list of exemptions? Will we have to pay taxes on them?
At this point, I don’t think anyone knows. The Tax Foundation is spot on with its analysis. As the AG’s explanation notes, “judicial or legislative clarification of the measure will be necessary.”
All of this discussion about definitions may sound like hair-splitting, but I have no doubt that when advocates and opponents square off on the application of this measure, if passed, we’ll get an array of arguments about the definition of IM-28’s terms.
Meantime, there is another, whole range of relevant arguments that center on whether the repeal can apply just to the state’s taxes or whether it will also remove the taxing authority of local governments. Dakotans for Health, the measure’s sponsor, addressed this matter in The Standard a couple of months ago, refuting the notion that IM-28 will take away the taxing ability of municipalities. Some powerful interested parties – including the South Dakota Municipal League – believe otherwise and have been speaking out against the measure.
I believe IM-28 is on the right track, but needs specificity. If it passes, we can brace ourselves for a long and contentious period as its implementation gets challenged while authorities try to sort out its intent. If it fails, I hope its supporters will come back with a replacement that removes its ambiguities and clearly spells out which groceries will be tax-exempt and which levels of government will be affected.
John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for 20 years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radioman in Vietnam. Republish with permission.
photo: public domain image, wikimedia commons
