The disgust South Dakotans feel over rising property taxes has yet to surpass the disgust their legislators feel at the prospect of implementing a state income tax of any sort to bring those property taxes down.
South Dakota remains one of the few states that eschews the three-legged stool of property/income/sales taxes and tries to get by taxing only property and sales. But if Legislators could get over their bias against income tax, how much wealth could they tap to rein in property taxes?
Consider that in 2024, South Dakotans paid $1.715 billion in property taxes on real property valued at $138.1 billion. That’s an effective tax rate of 1.24% on your house, your farm, your insurance office, what have you.
Per capita personal income in South Dakota in 2024 was $73,959. The Census Bureau figures South Dakota had 924,669 capita in 2024, so total personal income statewide was $68.388 billion.
So the amount of money South Dakotans make each year is just about half of the value of the wealth South Dakotans are sitting in the form of land, houses, offices, etc.
Suppose we wanted to trade one two-legged stool for another: eliminate property tax and replace the lost revenue with income tax. Getting $1.715 billion in tax out of $68.388 billion in income would require a personal income tax rate of 2.508%. Charging just a hair above the flat 2.5% state income tax rate in North Dakota and Arizona, the lowest flat-rate state income taxes in the nation, totally replaces property tax revenue in South Dakota.
But why trade one wobbly stool for another? The three-legged tax stool offers more fiscal stability.
So suppose we wanted to slash South Dakota’s effective property tax rate to 0.5%, a lower effective rate than you’ll find in any neighboring state. That would bring property tax revenue down about 60%, to $690.5 million. To recoup the $1.025 billion of lost property tax revenue, South Dakota would need a flat income tax rate of 1.50%.
In short, South Dakota could replace some property tax with a state income tax and easily manage to have the among the lowest effective rates of state taxation on both pots of wealth in the nation.
Income tax is bad. It is very bad.
Even Bill Dougherty voted against that.
Not going to happen until 2108.
A state income tax in South Dakota! Jon boy is hyperventilating already. He can run on his stupidity.
As a wise and learned man once told me, such a tax scheme would end you up with two high taxes that you would have to contend with.
How about an income tax that starts at $500,000 or $1 million per year? That would also help make our overall tax system a little less regressive.
How about an income tax that is a flat rate an applied to every earner regardless of income and deducted from the welfare handouts at the same rate, Mr. Nesiba? Treat the free money like income. BAH on income tax, BAH.
Grudz likes regressive taxes, always has and always will. The poor must pay for the wealthy. It’s A fact of life.
Oh, Dr. Nesiba, I’m eager to entertain discussion of progressive brackets. A lot of that $68 billion in personal income goes to persons of great wealth, so progressive brackets would either bring in more money than the flat tax I use for my basic calculations or make it easier to replace property tax dollars without impacting South Dakota’s lower-income households the way the Rhoden/Hansen property tax/sales tax swap does.
And how shall we, the enlightened philosopher kings, of SD define income to be taxed? Shall we follow the lead of the federal government and pose the highest rates upon those who do labor (including intellectual labor)? Can we break from that TERRIBLE notion to tax income from investment (realized and non) at rates equal to or more than labor? Can we decide that inheritance is income and tax that at the rate of labor?
South Dakota Democrats need to run on a corporate income tax, ending video lootery, reducing the number of South Dakota counties to 25 and turning Dakota State and/or Northern State University into community colleges.
These offerings are all interesting. Collecting money for the public’s needs has always been a hot topic. I remember thinking a property tax freeze was a good idea- until it wasn’t. The agencies, institutions, education, public works and “life” couldn’t (wouldn’t) stay stagnate and still be progressive in the future without adding more money to the coffers. I have never been one who believed that all the people of our country (state) didn’t deserve roads, schools, sewers, libraries, parks, etc., regardless of their wealth or lack there of.
I was a young single mother of two before paternal support and equal wages for females was offered (or tolerated). Welfare meant survival to me – not just a handout. I also worked like a mule and paid sales and income tax. Fifty years later, I am grateful and comfortably enjoying my retirement. Now I just want to support my kids and grandkids so that they can have a life at least as generous as mine has been. I didn’t need mansions, vast land ownership, yachts, jets or frequent world wide travel. Nor have I missed any luxuries I desired. My husband and I are retired, live in a home we’ve owned for 13 years with a dog, two cars and a golf cart. We live on retirement savings and social security – and pay cash for all of our taxes. Without Medicare I’m sure our assets column would be less, but we are healthy. The rich get richer, the poor get poorer and middle-income has reached over $100,000. Equal is not equal when it comes to current tax codes and taxation. Taxing large corporations and the higher incomes is not depriving or depressing the rights of anyone to food, healthcare and a place to live. I believe it is providing those rights for all our people.
Or I guess we could quit giving low interest loans, tax breaks, TIFs and other financial enrichments to large corporations and other magnates. I know some of these enticements are fruitful, but probably not lifesaving to their neighbors.
PS – I’m too wordy.
There has to be a fair way to assess property taxes. As I mentioned to O earlier, I am not middle class, and I am surrounded by poverty. Both of these have changed since I moved back to SD in 1992. My income has dropped dramatically even though I work part time because age related medical expenses, prices have risen on everything continually since covid, low wages, and my side of town has changed from a middle-class neighborhood to below poverty.
After 32 years, my house has lost value according to the county assessor. I live 2 blocks from the RR tracks, there’s old infrastructure, and there are now more rentals, fishing shacks, and B&Bs than owner occupied. I pay very little in property taxes, very little. Yet if I want to sell it, I’ll never get what I’ve paid for in remodeling. It’s worth $57,000 according to the bank but only $29,000 through the county. I pay $400 a year in property taxes so it’s the county’s loss not mine. I should be paying at least $1000.
At the same time, I have a friend whose house is the same square footage closer to the river north of town and she pays $12,000 a year in property taxes and she’s closer to the RR tracks than me.
If you want to get a property tax freeze through the county and state due to age, eligibility is based on gross income which I believe is very unfair. The form is not user friendly so some people would qualify but don’t bother.
An income tax in any other state would be implemented fairly, but not in SD. Fairness is too easy and what else would the powers that be in Pierre waste time on if they had a solution. They all need Character Counts with Tom Selleck to learn not just about fairness but citizenship, trust, responsibility, respect, and caring.
We all know that with deductions etc, the ones with the most pay the least. And since Republicans dominate this state, the burden will be placed on the working-class poor to get another job to pay Uncle Rhoden.
And by the way, if income is taxed, then food and clothing should not be. I’d swap that in a heartbeat IF it were fair.
Yeah, the only way to make South Dakota solvent and reduce property taxes is a progressive income tax married to property tax reduction through the education funding formula and a reduction in the sales tax. South Datota should be funding two-thirds of education funding. Local control of school districts should remain, but the number of school districts should be reduced through forced consolidation.
It’s time to stop pussyfooting around constantly putting Band-Aids on a system of taxation that has been broken for decades.