This November 2009 tax fact sheet lists nine states that lack a broad-based personal tax. Five of those states, including South Dakota, have no corporate income tax (well, not counting our bank tax). How do those states do in attracting big business?
Poorly. Look up the Fortune 500 companies (of which, we all know, there are none in South Dakota). All things being equal (they never are, but roll with me), by the logic of South Dakota Republicans who think roads and schools build themselves, you'd think the no-income-tax states would draw more of those smartest capitalists. But while those nine states make up 20.5% of the American population, they are home to only 18.2% of the Fortune 500.
| state | Fortune 500 companies | Pop (2010) | %F500 | %USPop |
|---|---|---|---|---|
| Alaska | 0 | 721,523 | 0.0% | 0.2% |
| Florida | 16 | 18,900,773 | 3.2% | 6.1% |
| Nevada | 3 | 2,709,432 | 0.6% | 0.9% |
| New Hampshire | 0 | 1,321,445 | 0.0% | 0.4% |
| South Dakota | 0 | 819,761 | 0.0% | 0.3% |
| Tennessee | 8 | 637,5431 | 1.6% | 2.1% |
| Texas | 57 | 25,268,418 | 11.4% | 8.2% |
| Washington | 7 | 6,753,369 | 1.4% | 2.2% |
| Wyoming | 0 | 568,300 | 0.0% | 0.2% |
| total | 91 | 63,438,452 | 18.2% | 20.5% |
| total minus Texas | 34 | 38,170,034 | 6.8% | 12.3% |
The only state in this list with a greater share of the Fortune 500 than of national population is Texas, and that flipped ratio probably has more to do with the presence of petroleum than the absence of taxes. Take Texas out of the calculation, and we no-income-tax states have just over half of the share of Fortune 500 companies you'd expect from our population.
It's probably too late this session to hope someone in our Legislature will propose a rational, progressive income tax to restore our state's fiscal health. But our legislators should look at data like the above and realie that a state income tax is not a obstacle to economic development.
Cory,
Are you proposing an income tax in addition to the current taxes levied on South Dakotans, or in replacement of?
Why do you recommend progressive taxes? If we can draw any lessons from our federal government, progressive tax structures get overly complicated and become vehicles for subsidies, which then become vehicles for the wealthiest to get tax breaks... kinda defeats the purpose. And given our Legislature, I'm not convinced they could refrain from tinkering.
Okay, let's enact a state personal and corporate income tax system identical to the one in, say, Minnesota.
Deficit gone! Right?
I wonder how many Fortune 500 companies, seeing our solution to our budget troubles, would come running here because of the new taxes?
Oh, Stan! I don't posit that point... although states that fully fund education, roads, and other amenities may have some advantageous appeal.
Wayne, I'd like to start with dollar-for-dollar replacement of, although if we have a deficit to fix, we either need to increase revenue or decrease spending. An income tax would better capture the steady GDP growth South Dakota has enjoyed while everyone else recessed (receded? experienced the recession?). As for loopholes and tinkering, our sales tax system is already shot through with exemptions and other tricks; that concern about income tax is non-unique.
Just because the concern is non-unique doesn't make the concern less valid, especially if we're talking about taxes couched in terms of progressivity which end up being less than the case.
The concern is valid but not a reason to vote against replacing a regressive tax with a progressive tax. The concern does warrant that we exercise great responsibility and oversight to resist the urge to create special exceptions to a fair tax code.
It looks to me like fortune 500 companies are interested in a bigger city. Soon enough when SF is bigger we will get one.
Wasn't Gateway a fortune 500 for a while?
Don't underestimate the power of winter to add costs to maintaining year-round operation.
Gateway was a Fortune 500 company. One of the reasons they gave for leaving was to be able to attract more talent which wouldn't move to SD. Along with that were concerns over airports, cultural issues, schools, etc. The fact that they moved to a state with a high income and corporate tax structure and a highly paid workforce didn't deter them in the least. These also weren't the reasons that they failed.
Right: Gateway failed because they built crap!
And Larry, good point. I'd be curious to see a comparison of snow days here versus hurricane days in Florida, or other natural disruptions of commerce.
"An income tax would better capture the steady GDP growth South Dakota has enjoyed while everyone else recessed."
What?
We experienced growth without an income tax; most other states have income taxes and most of them recessed.
You mean to suggest that we should emulate them?
In my opinion, they should emulate us.
Montana is the great glaring exception. They have no sales tax and a rather steep income tax, and as I understand it, they're running a surplus!
No simple theories will work here, will they?
I'll be honest - I'd vote against a progressive tax. It goes against my understanding of egalitarianism and the values espoused by our founding documents. I'm okay with helping support those at the bottom to give them a better chance of equal opportunities, but I see no reason we should discriminate against people because they make more than us. Doing so would be unequal treatment, and we should have a pretty high bar to pass before we conduct such treatment. "You need it less" just isn't compelling... plus we've shown a propensity to continue messing it up (see Warren Buffet & his secretary).
Our tax code is so ponderous that an entire service economy has grown up like a parasite, sapping more wealth from Americans just to figure out how to pay our taxes and minimize how much we pay. Taxes shouldn't be driving economic decisions. I shouldn't be buying new green cars and homes because the Tax Code gives me sweet deals to do so.
I don't care much for regressive taxes, either, for the obvious reasons. I am a fan of flat taxes when it comes to income. I don't see why someone who earns $40,000 shouldn't pay the same percentage to the government as the surgeon who earns $400,000. Does the surgeon deserve it less? Did she not give up more of her life and assume greater financial risk getting an education to earn that career (remember, you can't get out of student loans, no matter what)?
Re: Fortune 500 & Income Taxes... are you sure this isn't a spurious correlation? Jana may have a better list of variables to track. The message isn't "Get an income tax and you'll get businesses" - it's "grow a skilled workforce and you'll get/grow businesses".
Don't think the message I was trying to send was “Get an income tax and you’ll get businesses.†I do like your second message though.
The professionals that find locations for companies to expand or relocate have corporate and income taxes very low on their list of priorities.
So Wayne would you advocate an income tax similar to North Dakota's? How about just a flat 2%?
Montana struggles with an even greater disparity in classes, Stan. Big Sky operates a full capacity for about four months and generates what Rapid City does in a year while residents of the Crow and Rocky Boys live at the margins. Gallatin County does every day what the Rally does for the Hills in ten.
South Dakota is a commodity; Montana is value-added.
No intent to put words in your mouth - just remind folks what the message should be.
I would only support an income tax (personal and/or corporate) if it meant reducing / eliminating our reliance on other more regressive taxes (sales & property tax) and it was applied equally. I understand our taxes may need to go up some to prevent catastrophic damage to our economy, but we shouldn't lose sight of the fact that one in five workers in South Dakota works for some level of government. Even if we shift the tax burden to be one based on income, we're talking a significant burden on the population of the state.
I'm dubious about opening up other tax avenues, as both Republicans and Democrats have shown a woeful lack of restraint when it comes to responsibly spending what they have. It's compounded when healthcare costs experience double digit percentage increases.
Either that or we start looking for a new vice to support the state. Let's see we have loan sharking and usury that are letting us down. Then of course there's gambling and smoking...but they aren't playing well together. We could tax alcohol sales in Pierre during session and that might put a dent in the deficit...
Oh Jana, bless your heart. Cory, with your permission:
1. Make Deadwood a cannabis-friendly zone to counter the narco-warrior class exploding on the reservations.
2. http://interested-party.blogspot.com/2010/12/south-dakotas-republican.html
3. http://interested-party.blogspot.com/2010/04/can-lead-hang-on.html
4. http://interested-party.blogspot.com/2010/06/can-heptane-distilled-from-beetle.html
5. http://interested-party.blogspot.com/2010/09/connect-dots.html
We could incomes that suddenly jump from $17,000 to $120,000 or just republicans because they're the ones with all the dough.
excusez-moi, that's we could tax incomes..........
Wayne-
Don't forget that 1 in 5 south dakotans works for the government because the state as a whole is subsidized. This proportion is unusual because SD is unusual.
Fiscally, SD can't afford things like 4 lane highways or our massive parks. Even our farms if you consider farm subsidies. So, calling out state taxes as bad because we have lots of people working for our subsidized government is Non sequitor.
I don't think taxes aren't bad, Tony; they're necessary to provide essential services. However, we should take care to only tax as much is needed to effectively provide essential services. We shouldn't be taxing just to provide jobs in local or state government.
I don't have a problem with my money going to help provide services for this state. I have a huge problem when it costs more to administer a program than the services provided (except in Education, since teachers count as operational expenses). I don't see any reason why we should complacently allow for inefficiencies and largesse in the public sector when it isn't tolerated privately.
Do I understand that government will be less efficient? Yes. Does that mean we shouldn't try to minimize that inefficiency? No.
Americans have had more productivity squeezed out of them due to the recession. Why shouldn't the same hold true for civil servants?
Wayne-
And I agree with you. Taxes aren't bad, they are necessary and good. Where we disagree is your assertion that since 1/5 of SD workers are employed through the government that inherently is a sign of government inefficiency.
The reason that we have such a high per capita population of government employed workers is that SD is subsidized by the rest of the nation. The rest of the nation has decided that subsidizing infrastructure/forestry/farming is in the nation's interest (for various reasons). For every buck SD puts into the federal pot we get 1.5 bucks back. We shouldn't view this as automatic inefficiency.
Now, you have claimed in your second paragraph that there are obvious examples of inefficiency in our state programs. Could you point out a few examples of such inefficiency?
Lastly, with your last remark regarding public servant efficiency, are you proposing that we just fire X% of some programs and see if they can keep up? The public sector isn't like the private sector. Generally the public sector has relatively stable budgets and similar staffing year over year. In contrast, during good economic periods private firms expand rapidly which certainly leads to bloat an inefficiency which can easily be chopped off during belt tightening time. Let's consider education for example. During the 2000-2008 time period did we see per pupil expenditures increase by say 50%? Of course not, the public service sector didn't expand simply because of good economic times.