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South Dakotans Contribute 39% of State and Local Tax Burden to Other States

Yesterday I characterized South Dakota as a freeloader state, keeping its own taxes low by milking Uncle Sam for handouts. If you subtract out average per capita deficit spending, South Dakotans get $1.46 back from Uncle Sam for every $1.00 they pay in federal taxes. (By this deficit-adjusted metric, our Minnesota neighbors get just 45 cents back on each dollar they send to Washington.)

I must amend by noting that in one interesting regard, we South Dakotans are relatively generous to our neighbors. The Tax Foundation's study of state and local tax burdens calculates the amount of taxes that we pay not just to our own state but to other states. We South Dakotans pay out-of-state sales tax when we go to Vikings and Broncos games. We pay income tax when we got to work in Sioux City. We pay property tax on our vacation homes on Okoboji. We pay some of Wal-Mart's corporate taxes as they pass on to us the cost of their corporate taxes back home.

Tax Foundation analysts Elizabeth Malm and Gerald Prante crunch all these numbers and come up with everybody's in-state and out-of-state tax burdens.

State Taxes Paid to Home State (per capita) Taxes Paid to Other States (per capita) % to out-state rank by tax export
Alabama $1,850 $890 32.5% 10
Alaska $2,150 $1,063 33.1% 9
Arizona $2,068 $938 31.2% 14
Arkansas $2,410 $875 26.6% 35
California $3,953 $981 19.9% 50
Colorado $2,910 $1,194 29.1% 24
Connecticut $4,966 $2,018 28.9% 25
Delaware $2,137 $1,590 42.7% 2
Dist. of Columbia $3,966 $2,025 33.8% 7
Florida $2,621 $1,107 29.7% 23
Georgia $2,309 $913 28.3% 27
Hawaii $3,367 $1,029 23.4% 46
Idaho $2,118 $983 31.7% 13
Illinois $3,388 $1,124 24.9% 43
Indiana $2,428 $866 26.3% 39
Iowa $2,658 $1,002 27.4% 33
Kansas $2,638 $1,164 30.6% 16
Kentucky $2,216 $811 26.8% 34
Louisiana $1,900 $951 33.4% 8
Maine $2,860 $947 24.9% 44
Maryland $3,855 $1,379 26.3% 38
Massachusetts $3,987 $1,435 26.5% 37
Michigan $2,694 $809 23.1% 47
Minnesota $3,640 $1,087 23.0% 48
Mississippi $1,838 $787 30.0% 22
Missouri $2,310 $1,018 30.6% 17
Montana $2,005 $1,084 35.1% 6
Nebraska $2,769 $1,085 28.2% 29
Nevada $2,089 $1,207 36.6% 5
New Hampshire $2,210 $1,507 40.5% 3
New Jersey $4,853 $1,836 27.4% 32
New Mexico $2,022 $884 30.4% 19
New York $5,151 $1,224 19.2% 51
North Carolina $2,648 $887 25.1% 42
North Dakota $2,540 $1,193 32.0% 11
Ohio $2,720 $843 23.7% 45
Oklahoma $2,125 $935 30.6% 18
Oregon $2,755 $974 26.1% 40
Pennsylvania $3,118 $1,065 25.5% 41
Rhode Island $3,318 $1,309 28.3% 28
South Carolina $1,909 $851 30.8% 15
South Dakota $1,857 $1,178 38.8% 4
Tennessee $1,844 $863 31.9% 12
Texas $2,221 $882 28.4% 26
Utah $2,226 $955 30.0% 21
Vermont $2,906 $1,248 30.0% 20
Virginia $3,132 $1,205 27.8% 30
Washington $3,088 $1,173 27.5% 31
West Virginia $2,222 $806 26.6% 36
Wisconsin $3,414 $965 22.0% 49
Wyoming $2,075 $1,647 44.3% 1
z-U.S. Average $3,055 $1,056 25.7%

Of the well below-average $3,035 we South Dakotans pay in state and local taxes, 39% goes to other states. By percentage, that's the fourth-highest rate of tax export of all states. Nationwide, the out-state tax burden is 26%.

There's no avoiding paying taxes to other states. Plus, it's a two-way street: we make plenty of money off tourists and folks with vacation homes in the Black Hills.

But it's important to remember that when we look at the $3,035 figure as our annual per capita state and local tax figure, only $1,857 of that amount is going into South Dakota's coffers. That's all you and I are paying for our schools and roads. We each contribute another $1,178 to maintain other states' schools and roads.

p.s.: The Tax Foundation says South Dakota's annual per capita income is $40,018, 23rd in the nation. You wouldn't know that from our second-lowest-in-the-nation state/local tax burden and our lowest-in-the-nation teacher pay. If we taxed ourselves at the national average of 7.4%, we'd each pay $1,114 more to Pierre and our local governments... which would total over $900 million more to pay teachers, pave roads, and create other public goods.


  1. Michael Black 2012.11.25

    That $1114 figure you quote is about what my family's health insurance goes up every year. At some point my wallet runs dry - adding $900 million is not something that I would vote for.

    I'm not sure what you are getting at with all of the tax posts. Members of Congress are poor stewards of our tax dollars and now refuse to pass a budget. The state spends only what it receives from it's sources including the feds. We pass our budget yearly.

  2. caheidelberger Post author | 2012.11.25

    Oh come on, Michael. You can always find ways to be more efficient with your money, can't you?

  3. Michael Black 2012.11.25

    Cory, I am forced to be more efficient every day. At the studio, I study a period of time each day on how to get better at marketing, business, photography, photoshop and enjoying life. Dual computer screens are cool. I can retouch all day while listening.

  4. Richard Schriever 2012.11.25

    One thing that seems to have been left out is the amount of SD tax payer dollars that go to pay interest on state and local bonds. It seems unlikely to me that the majority of thoise bonds are held by our fellow SDn's, or even SD financial institutions. One more way our tax dollars go out of state.

  5. Stan Gibilisco 2012.11.25

    Interesting stuff!

    I can draw one certain conclusion from all these tax statistics: We South Dakotans are generous, except when we're not.

  6. Steve O'Brien 2012.11.25

    There must be a message here about business climate. SD is touted as a state wit ha great business climate - because of it's low taxes (certainly not its commitment to infrastructure needed for business and development), yet SD sends 38.8% of taxes to states that I can only presume do not have as favorable tax/business climate of our home.

    To me, this export of taxes seems to shatter the myth of favorable business climate as a key to growth for our state. People are willing to pay these taxes to other states, so why not to their own?

  7. Stan Gibilisco 2012.11.25

    Aw shucks, Cory, why not round it up to an even billion? The taxpayers of this state are rolling in dough.

  8. caheidelberger Post author | 2012.11.25

    Well, somebody is rolling in dough, Stan, but they're doing a good job of keeping it out of public hands. Where's the trickle-down?

  9. Stan Gibilisco 2012.11.25


    Verrrrry interesting stuff! Surprises me.

    The article does say that farm income rose in 2011 by 102 percent while other income rose by only a few percent.

    Drench and drought ... the nature of this beast. We do well to keep a tight rein on our spending.

    I wish that the sales tax bill, recently defeated, had included an exemption on groceries (for the whole 5 percent, not just the increase.)

    Oh well. I suspect Cory is working toward the notion of a state income tax, but I suspect also that it has about the same chance of passing in this state as a ball of the fresh fallen snow here has on my Pink Slime Preparation Pan (PSPP), preheating at this very moment.

    I was really surprised to see how low Arizona is on that income list.

    Growing gap between rich and poor? No news there. It's happening all over the world.

  10. caheidelberger Post author | 2012.11.26

    Darn right I am, Stan! It seems like any tax we pick will be subject to boom and bust (like the current ag boom mentioned in the article Jana cites as boosting our wealth above the national average). Could we build robust trust funds for K-12 and higher ed that would smooth over the differences from fat year to lean year and protect schools and universities from Daugaard-style cuts?

  11. larry kurtz 2012.11.26

    "Federal coal royalty is 65 percent of all federal royalty paid to Wyoming, funding highways, schools, the University, and local governments." RT @BLMWyoming

  12. WayneB 2012.11.27

    Hrm... interesting.

    I keep track of the sales tax I pay (just in case Congress will bring back that itemized deduction). I will have paid over $1,200 in sales taxes this year, primarily to South Dakota.

    My property taxes on my home were a hair over $2,400

    So I'm a little above average in tax burden.

    I don't consider myself wealthy by any stretch of the imagination, but I don't have to worry about my next meal.

    However, I don't have $1,114 just lying around to give to SD every year. If I did, it'd be going into the market, my 401k, or something to ensure I didn't need to ask Uncle Same for as much to take care of me in my golden years.

    An income tax is all well and good, but because we're talking in addition to and not as a replacement of our current regressive taxes, it's going to be hard to sell.

  13. larry kurtz 2012.11.27

    By 2015, it’s expected that Stanley/Hughes be 45 percent old (and overwhelmingly white people of the earth hater persuasion) : CapJournal.

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