South Dakota Governor Larry Rhoden addressed a joint session of the Legislature on January 28, 2025, proposing a property tax reform plan aimed at limiting annual increases in assessed values for owner-occupied residential properties. His proposal, outlined in Senate Bill 216, seeks to cap annual growth at 3% for five years.
However, the plan has sparked concerns about its broader impact on the state’s property tax system. Critics argue that it will shift the tax burden onto commercial properties and second homes, such as vacation properties in the Black Hills.
Additionally, they contend that the plan fails to address longstanding disparities in agricultural property taxation.
South Dakota currently uses a productivity-based assessment system for agricultural land, which assesses value based on crop production rather than market price.
This has created significant differences between assessed and market values, with agricultural properties often taxed at a far lower rate than residential and commercial properties. For example, recent sales data showed that a Spink County farmland parcel valued at $960,000 was assessed at only $250,984, resulting in a much lower tax bill than similarly valued residential or commercial properties.
Opponents of SB 216 argue that it mirrors past legislative missteps, such as the 2023 sales tax reduction that contributed to current budget shortfalls.
They caution that capping residential property tax increases without broader reform may exacerbate the imbalance in the tax system and create new challenges for future legislatures.
Governor Rhoden maintains that the proposal is a necessary measure to provide relief to homeowners facing rising property values and tax bills.
However, lawmakers face pressure to consider comprehensive reforms that address disparities across all property types rather than implementing temporary solutions.