Budget
February 27, 2025 | SEAL SD Liberty
Final Analysis: Balancing South Dakota’s Budget with a 5% GRT and Strategic Spending Adjustments
The Core GRT Plan, with a 5% Gross Receipts Tax (GRT), replaces all state taxes, eliminates property taxes, and streamlines government operations. By analyzing South Dakota’s publicly available budget data, we’ve identified areas for significant spending cuts and savings, ensuring essential services remain fully funded while reducing government waste. This approach not only balances the budget but also aligns with the GRT plan’s goal of a leaner, more efficient government.
Key Findings:
- A 5% GRT generates ~$3.6 billion per year.
- This replaces 100% of property tax revenue (~$1.6 billion), sales tax revenue (~$1.5 billion), and other fees (~$0.5 billion).
- It fully funds the general fund with a ~$95.8 million surplus, eliminating any shortfall.
- To enhance efficiency, the state can:
✅ Reduce spending by targeting unnecessary government offices, cutting waste, and streamlining agencies.
✅ Eliminate the existing 4.2% sales tax, making everyday goods more affordable.
✅ Use the surplus to bolster essential services or provide additional tax relief.
1. Where to Cut Spending?
South Dakota’s state budget for FY 2025 is $7.3 billion, with general funds at $2.39 billion, an 8.3% increase from the prior year, driven largely by sales tax revenue (web ID: 2). However, ongoing revenue projections for FY 2026 show only a 2.9% increase to $2.46 billion, despite rising costs like Medicaid (web ID: 6, web ID: 15). To align with the GRT plan’s goal of reducing government size, we propose the following cuts, beyond those directly tied to property tax administration:
| Category | Estimated Potential Savings (Billion $) | Notes |
|---|---|---|
| Eliminate Property Tax Administration (County Assessors, Appeals, etc.) | $0.0285 | No longer needed under GRT (400+ functions closed, as in prior conversations). |
| Streamline Non-Essential Agencies (Regulatory Overlap) | $0.15 | Reduce overlapping functions in departments (e.g., administrative redundancies). |
| Cut Non-Critical Grants & Programs | $0.12 | Review programs like non-essential grants, focusing on core responsibilities (web ID: 2). |
| Reduce Administrative Costs (Vehicle Fleets, Real Estate) | $0.08 | Follow examples like Maryland’s efficiency cuts (web ID: 24). |
| Freeze Non-Essential Hiring & Adjust Benefits | $0.05 | Limit new hires, adjust state employee benefits modestly (web ID: 9). |
| Total Estimated Savings | $0.4285 | Enhances efficiency while maintaining essential services. |
✅ With these spending cuts, South Dakota can reduce its budget by $428.5 million, streamlining government operations and redirecting funds to critical areas like education and public safety.
2. Impact of the 5% GRT Plan on Budget and Government Efficiency
The 5% GRT plan not only eliminates property taxes but also replaces the 4.2% sales tax, reducing the tax burden on everyday purchases while streamlining government:
- Lower Property Costs: No property taxes mean savings of $3,200–$19,200 annually for households and farms, with no risk of foreclosure due to unpaid taxes (Slide 4).
- Reduced Consumer Costs: Eliminating the 4.2% sales tax lowers costs on goods (e.g., a $30,000 car saves $1,260 in sales tax, though the GRT adds $1,500, netting a $210 cost increase offset by property tax savings).
- Smaller Government: Beyond the 400+ property tax-related closures, additional cuts reduce bureaucratic overhead, saving $428.5 million annually.
- More Business Growth: Businesses save on property taxes (e.g., $19,200 for a $1.5M apartment building, Slide 11) and benefit from tax certainty, fostering economic growth (web ID: 1).
- Full Funding with Surplus: The $3.6 billion GRT revenue fully funds schools ($960M), roads ($1.5B), police ($215M), and courts ($829.2M), with a $95.8M surplus (Slide 5).
Final Conclusion: GRT at 5% + Strategic Cuts = Tax Freedom and Efficient Government
✔ Replaces 100% of property taxes, sales taxes, and other fees.
✔ Fully funds the general fund with a $95.8 million surplus.
✔ Reduces government waste by $428.5 million through targeted cuts.
✔ Eliminates the sales tax, lowering costs on everyday goods.
This approach ensures South Dakotans keep more of their money, enjoy a smaller, more efficient government, and maintain strong public services, all while leading the nation in tax freedom and prosperity.
Would you like a detailed legislative roadmap on how to implement this plan at the state level?