The combination of property tax savings and sales tax increases will affect each household differently.
Raising sales tax by 1/2 cent will raise about $107 million dollars. And decreasing property tax will cost about $40 million dollars. But how much will your household pay to support the change? You can figure that out by answering two questions.
Question 1: Do I own my home? If so – what is its current tax evaluation? This estimates how much you will save in property tax.
Question 2: What is my household income? This estimates how much more you will pay in sales tax.
Examples for owner occupied residences:
Formula: Household A Household B Household C Household D
+ Property tax decrease -00- $45 $113 $225
– Sales tax increase – $154 – $212 – $267 – $390
Household net tax increase/decrease $154 $167 $154 $165
Household A: This household has an income of $34,000 per year and rents. Their sales tax increase is $154.00 They will not have any direct property tax savings (unless their landlord chooses to pass the commercial property tax savings on to the tenants). Their net annual tax increase will be $154.00
Household B: This household has an income of $59,000 per year and owns their own home, valued at $100,000. They will save $45 a year in property taxes and pay an additional $212 in sales tax. Their net annual tax increase will be $167.
Household C: This household has a household income of 89,000 a year and owns their own home, valued at $250,000. They will save $113 a year in property taxes and pay an additional $267 in sales tax. Their net annual increase will be $154.
Household D: This household has an income of $302,000 per year and own their home, valued at $500,000. They will save $225 a year in property taxes and pay an additional $390 in sales tax. Their net annual increase will be $165.
Analysis and charts by SD Budget & Policy Institute. Data Sources:
1Institute on Taxation and Economic Policy January 2016 analysis of 1/2 cent property tax increase, published in SD BPI “Who Pays increased SD sales taxes to raise teacher salaries?” 2-8-2016
2 Governor Daugaard’s 12% Tax cut Teacher Pay Proposal presented to Joint Committee on Appropriations, posted 2-5-15