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PIERRE, S.D. (AP) — Shoppers are set to spend a little more at the store when South Dakota's historic half-cent sales tax hike for teacher pay takes effect.
The state sales tax rate increases from 4 percent to 4.5 percent on Wednesday in the first permanent jump in nearly 50 years. Cities can also impose sales taxes on top of the state rate.
Here's a look at the tax hike:
TEACHER PAY
State lawmakers passed the tax increase this year as a way to put more than $60 million in new funding toward boosting South Dakota's lowest-in-the-nation teacher pay to a target average of $48,500 per year. Gov. Dennis Daugaard signed a package of education measures, including the tax hike, which also puts millions of dollars toward property tax relief and salaries at technical schools.
A state task force found that South Dakota teachers earn less than their counterparts in every other state and Washington, D.C. The state's average teacher salary of $40,023 in 2013-14 was $8,643 less than that of North Dakota, its next-lowest neighbor.
The new money will help improve education in South Dakota and ensure that students have high-quality teachers, said Mary McCorkle, president of the South Dakota Education Association.
HISTORIC INCREASE
This marks the first permanent increase in the state's sales tax rate since 1969. The rate was temporarily increased to 5 percent twice in the 1980s to purchase rail assets and for a state economic development loan fund, said Jonathan Harms, a spokesman for the state Department of Revenue. South Dakota introduced its sales tax in 1935, when it was 2 percent.
Daugaard isn't enthusiastic about tax increases, but he said there was no way within current state receipts to make an "appreciable impact" on teacher pay without raising revenue.
The increase is expected to raise about $107 million in its first year.
In addition to teacher pay, about $36.5 million of the increase will go toward property tax relief and about $3.2 million will go toward salaries at technical schools.
SMOOTH SAILING
The Revenue Department's goal is to make the transition as easy as possible for taxpayers, Harms said. South Dakota Retailers Association Executive Director Shawn Lyons said businesses are making the necessary changes without offering much pushback.
"By and large, it should not be that difficult of an adjustment," he said.
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