Sure, South Dakota has low taxes… if you’re rich. The Institute on Taxation and Economic Policy reports in the seventh edition of its “Who Pays?” analysis of state tax systems that South Dakota continues to have among the most regressive taxes in the nation:
Ten states — Florida, Washington, Tennessee, Pennsylvania, Nevada, South Dakota, Texas, Illinois, Arkansas, and Louisiana — are particularly regressive, with upside-down tax systems that ask the most of those with the least. These states tax their poorest residents — those in the bottom 20 percent of the income scale — at rates averaging three times higher than those charged to the wealthy. Middle-income families in these states pay an average rate more than twice as high a share of their income than the wealthiest families. Florida, which has the most regressive state tax system in the nation, fares worst by these two measures, with low-income families paying almost 5 times more than the wealthy and middle-income families paying more than 3 times more [ITEP, “Who Pays? 7th Edition: The 10 Most Regressive State and Local Tax Systems,” January 2024].
In South Dakota, middle-income earners pay 3.0 times the rate that the wealthiest 1% do; the lowest quintile pay 4.4 times the elite rate:
Nationwide, state and local taxes are regressive, but not by the same ratios as in South Dakota. The bottom 80% of wage earners pay around 1.4 to 1.6 times the rate that their wealthiest neighbors pay in state and local taxes:
Notice that South Dakota taxes its lowest-income residents a hair more than the national average. South Dakota taxes the great middle 30% less than the national average, but South Dakota taxes its well-off one-percenters 64% less than the national average.
It wouldn’t be hard to shift those percentages, provide more tax relief to the folks who need relief the most, down at the bottom of the income ladder, and still leave South Dakota’s richest folks paying no more than the national average for their percentile of 7.2%.
Or we could consider joining the rare few states (six plus D.C., by ITEP’s criteria) with progressive tax systems, which sensibly put greater burdens on greater wealth. Minnesota ranks #2 for progressivity:
…and look at all the money they have to do good things like feeding kids.
But making South Dakota’s tax system progressive and relieving the poorest South Dakotans of their undue tax burdens would require bold vision and policy reform, and contrary to the Governor’s claim of challenging the status quo, pushing innovation, and looking for out-of-the-box solutions, the Governor’s Top-Ten podium preening thinly inflated to a State of the State Address contained nothing of the sort, leaving South Dakota’s regressive tax status quo unchallenged and not even looking into the box next door for solutions.