South Dakota sales tax revenue for the fiscal year ending June 30 was equivalent to 1.8 percent below the year before, state economist Jim Terwilliger said Tuesday.

Masking the downturn was that the sales tax rate rose to 4.5 percent from four.

The rate increase produced 10.5 percent more in revenue to the state treasury, Terwilliger told members of the state government’s Council of Economic Advisors.

But, he said, the money generated was less than the boost expected when the Legislature voted to raise the sales tax rate in 2016.

State government collected the equivalent of less money year over year in 10 of 12 months during fiscal 2017, Terwilliger said.

He tied the weakness in tax revenue directly to weakness in the agricultural economy, specifically lower prices that crop producers received for their major commodities.

Fiscal 2017 marked “the trough” for agricultural spending in South Dakota, Terwilliger said. It was the third consecutive year of slumping crop prices.

First quarter sales-tax numbers for fiscal 2018 showed July up 5 percent, August down by less than 1 percent and September up about 2 percent.

State government’s 2018 budget is built on an assumed 4 percent rate of growth.

“I don’t know if we’re going to get there,” Terwilliger said.

He showed to the council a chart tracking tax revenue from sales of agricultural equipment in South Dakota.

The revenue from ag equipment sales for calendar 2016 was down to about $10 million, the same level as from 1996 to 2001. After slumping to about $5 million in 2002, revenue had been $15 million or higher in 12 of the next 13 years.


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