Hypothetical:

April 19, 2025
Seal SD Liberty

Hypothetical: 100% GRT at 5% Rate vs. Current System and SEAL SD Liberty GRT Plan

Current System: Sales and Property Tax Revenue

State-Wide Sales Tax Revenue

  • State Sales Tax (4.5%): $883.6M (on $19.6B taxable sales, 60% of $32.7B gross sales).
  • Local Sales Tax (up to 2%): Estimated at $392.7M (e.g., Rapid City’s $32.2M scaled state-wide).
  • Total Sales Tax: $1.276B.

State-Wide Property Tax Revenue

  • Total: $1.6B (funding schools, counties, and cities).
  • School Portion: ~$960M (60% of $1.6B).
  • County/City Portion: $640M (remaining 40%).
  • Rapid City Example: $43.55M (city, school, county levies).

Total Current Revenue

  • Sales Tax: $1.276B
  • Property Tax: $1.6B
  • Total: $2.876B

Hypothetical: 100% GRT at 5% Rate (Eliminating All Sales Taxes)

State-Wide GRT Revenue

  • Gross Receipts Base: $72B (all business transactions, including retail, services, agriculture, tourism).
  • GRT Rate: 5%.
  • GRT Revenue: $72B × 0.05 = $3.6B.

Comparison to Current System

  • Current Total Revenue: $2.876B (sales + property tax).
  • GRT at 5%: $3.6B.
  • Surplus: $3.6B – $2.876B = $724M.
  • Impact: A 5% GRT would not only replace the $1.276B in sales taxes and $1.6B in property taxes but also provide a $724M surplus, ensuring all services are funded state-wide with extra funds for schools, infrastructure, or rebates.

Comparison to SEAL SD Liberty GRT Plan

  • Current GRT Plan (2.5%): Generates $1.8B, replacing $1.6B in property taxes, with $200M for rebates, leaving $1.6B for services. A $1.076B shortfall exists compared to the $2.876B total, mitigated by residual sales tax ($127.4M), economic growth ($1.83M-$2.75M), and efficiency measures.
  • Hypothetical 5% GRT: $3.6B eliminates the shortfall, providing a $724M surplus without needing residual sales tax or efficiency adjustments.
  • Rapid City Impact:
  • Current GRT Plan: $116.1M (includes $84M for schools, $22.4M for police/fire, $1M surplus).
  • At 5% GRT: Rapid City’s share (6.45% of state-wide revenue) would be $3.6B × 0.0645 ≈ $232.2M, doubling current funding, ensuring robust services.

Funding Assurance

  • State-Wide: The $3.6B at 5% GRT exceeds the $2.876B current revenue, fully funding schools ($960M), counties, and cities, with a $724M surplus for additional services or rebates.
  • Rapid City: $232.2M ensures schools, police, fire, and more are overfunded compared to the current $148.25M (sales + property tax), eliminating any shortfall concerns.

Conclusion

A hypothetical 5% GRT generating $3.6B would more than cover South Dakota’s current $2.876B from sales and property taxes, providing a $724M surplus, proving the state can be fully funded without sales taxes, unlike the current GRT plan’s $1.076B shortfall that relies on additional measures.