South Dakota lawmakers deadlock on tax reform as property taxes rise and a $1.8 billion budget gap looms.

South Dakota lawmakers are divided on addressing rising property taxes as the 2026 gubernatorial race heats up. Senate Bill 99, which would raise the sales tax to 6.2% (excluding groceries) to cut property taxes, was tabled over concerns about complexity and fairness. In response, Senate Bill 97 raised the property tax revenue cap to 5% and passed 6-1. Gubernatorial candidates propose differing solutions: Gov. Larry Rhoden supports county-level half-cent sales tax increases, Rep. Dusty Johnson backs targeted tax credits funded by a broader sales tax hike, and businessman Toby Doeden advocates eliminating property taxes via a luxury consumption tax. Legislative gridlock persists amid uncertainty over how to close a $1.8 billion budget gap.