Q&A: GRT Plan Revenue GDP

April 16, 2025
Seal SD Liberty

Q&A: GRT Plan Revenue Deductions from GDP

Question

GDP includes a number of items that you are considering exempt. Government spending, healthcare, and groceries, for example. Where is the deduction from GDP to account for those and the small businesses that will not pay this?

Answer

Great question! South Dakota’s GDP is indeed around $70 billion, but not all of that is taxable under the GRT plan because of exemptions for government spending, healthcare, groceries, and small businesses under $100,000. Let’s break down how we account for these deductions to arrive at the taxable base:

  • Starting Point: South Dakota’s GDP includes all economic activity—consumer spending, business sales, government spending, and more. However, the GRT only taxes business gross receipts, not the entire GDP. Gross receipts exclude government spending (e.g., state/local budgets, ~$2.5B in 2023) and certain consumer expenditures like personal income spent on non-taxable items.
  • Exemptions Deduction:
  • Government Spending: Government purchases (~$2.5B, 2023 state budget) are exempt, as the GRT applies to private business sales, reducing the taxable base by this amount.
  • Healthcare: Healthcare spending (~$5B, based on national averages of ~7% of GDP) is exempt, further reducing the base. This includes doctor visits, hospital services, and other medical expenses.
  • Groceries: Grocery sales (~$3B, estimated from national per-capita spending) are exempt to protect families, deducting this from the taxable base.
  • Small Businesses Under $100,000: About 45% of South Dakota’s 87,000 businesses (39,150) have gross receipts under $100,000 and are exempt, removing ~$10B from the taxable base, as noted in the plan (April 15, 2025, 20:21).
  • Adjusted Taxable Base: After these exemptions, the taxable base for non-agricultural businesses is ~$69 billion. This comes from the remaining business sales in sectors like retail, dining, tourism, and manufacturing. Agriculture adds another $5 billion (taxed at 1.5%), which isn’t part of the $69 billion but contributes to the total revenue.
  • Revenue Calculation: The $69 billion taxable base at 2.5% yields $1,725 million, plus $75 million from agriculture (1.5% on $5 billion), totaling $1.8 billion. For example, Rapid City alone contributes ~$116.1 million from its businesses, showing how urban areas help drive this revenue (April 15, 2025, 20:31).
  • Why It Works: South Dakota’s economy is strong, and business gross receipts—not the entire GDP—are the focus. Exemptions protect essentials, but sectors like tourism ($4B, $100M GRT), manufacturing ($2B, $50M GRT), and retail/services ($69B, $1,575M GRT) ensure we raise more than the $1.6 billion needed, leaving a $200 million surplus for rebates (April 15, 2025, 20:21).

This plan ensures tax freedom without risking schools or services—schools get ~$960 million state-wide, and services like Rapid City’s police and roads are fully funded (April 15, 2025, 20:31). Join us at the Liberty Forum on April 19, 2025, to learn more!