Southeast South Dakota News

Congress has a critical job to do before the Fourth of July: pass the budget reconciliation bill commonly referred to as “The Big, Beautiful Bill” to restore the 2017 tax cuts and stop a massive tax hike from slamming working Americans.

If Congress doesn’t act fast, South Dakotans could face an average 25% tax increase. That’s nearly $2,900 more per taxpayer. Washington’s failure to make the 2017 tax cuts permanent would hit our working families and small businesses hard, and that’s something we simply can’t allow.

But in our rush to get this bill passed, we also have to watch out for Washington’s dirty habit of sneaking in bad policy when no one’s looking. One of those traps is a hidden tax hike on South Dakota manufacturers and ag producers that was added to the House bill—without debate, without transparency, and with no clear explanation.

Thankfully, Congress stood up and removed it from the Senate version. Now, as the House and Senate work out a final deal, we must make sure this harmful provision doesn’t sneak back in.

A long-standing and commonsense tax policy called the “duty drawback” allows U.S. exporters to get refunded for some of the tariffs they pay on imported goods if they later use those products to make other exported goods. In some cases, if companies import and export similar goods, they can qualify for this refund too.

If that sounds confusing, remember our state sales tax policy: manufacturers don’t pay sales tax on raw materials they make into a final products, and retailers don’t pay sales tax on goods they buy to resell. Sales taxes are paid on the final purchase by the consumer. 

The logic is simple. Taxing every intermediate step of product creation or distribution would raise prices, kill jobs, and force producers to locate elsewhere. Similarly, if a South Dakota company imports raw materials, processes them here, and ships the final product overseas — or if they export similar products to what they import — they’re creating jobs here in South Dakota. Why would we want to punish that?

Unfortunately, the House-passed version of the bill includes a change that would make it much harder—or even impossible—for certain farmers and value-added agricultural processors to claim this refund. Some political analysts also fear that, if this change takes effect, other beneficiaries of the duty drawback will be targeted next. 

Any change to the duty drawback would amount to a hidden tax hike on exporters at the very moment we’re trying to make America more competitive.

In South Dakota, we know how important exports are to our way of life. In 2024, our state exported $2.1 billion in goods—a 34 percent increase since 2014. These exports accounted for nearly three percent of our state’s GDP and supported an estimated 27,000 jobs in 2022 alone.

And these aren’t minimum-wage jobs. Nationally, goods-export-related jobs pay up to 18 percent more than average. Whether it’s our grain, livestock, machinery, or specialized manufacturing, South Dakota’s global reach is a core part of our prosperity.

We should be applauding exporters, not penalizing them with hidden taxes.

The Big Beautiful Bill was designed to make the 2017 tax cuts permanent, restore growth, and keep America competitive in the face of rising threats from China and other rivals. That mission is too important to let tax-hungry bureaucrats sneak in last-minute provisions that would do real damage to our economy.

I commend Congress for striking this provision from the Senate bill, and I call on Sens. John Thune and Mike Rounds to ensure it remains out of the final version.

Every day we delay final passage, the clock ticks closer to a devastating tax hike on South Dakota families. But rushing through the wrong version of the bill could quietly do damage of its own.

Let’s get this done—and let’s get it right. Keeping the 2017 tax cuts and stopping hidden tax hikes is the way to protect South Dakota’s jobs, economy, and future.

Isaac Latterell is a former Republican member of the South Dakota House of Representatives and former Majority Whip