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South Dakota Fourth in “Terrible 10” for Regressive State and Local Taxes

The New York Times reports that South Dakota is #4 among the "Terrible 10"... for regressive state and local taxes. According to data from a new report from the Institute on Taxation and Economic Policy, the percentage of income that non-elderly residents in the lowest 20% income category pay in state and local taxes is 9.5 percentage points more than the percentage of income paid by the wealthiest 1%. Only Washington, Florida, and Texas have a larger gaps between their tax burdens on poor and rich.

Here's how the state and local tax burdens stack up on income brackets in South Dakota and the surrounding states:

State/Local Tax
Burden on...
Lowest 20% 11.3% 8.8% 10.4% 10.9% 8.2% 6.1%
Second 20% 9.1% 9.7% 10.2% 9.9% 6.9% 6.1%
Middle 20% 7.7% 9.6% 9.7% 10.3% 5.9% 6.4%
Fourth 20% 6.9% 9.7% 9.5% 9.3% 4.7% 6.1%
Next 15% 5.5% 8.5% 8.4% 8.1% 4.0% 5.8%
Next 4% 3.8% 8.4% 7.0% 7.6% 2.7% 5.2%
Top 1% 1.8% 7.5% 6.0% 6.3% 1.2% 4.7%

South Dakota offers lower tax burdens than Minnesota on everybody but the poor. Montana imposes lower tax burdens than South Dakota on everybody but the top 20%. Minnesota, Montana, and Iowa offer relatively less regressive taxation schemes, keeping the tax burden roughly consistent for most income brackets and offering the least differentials between the burdens on the bottom 20% and the top 1%.

Note that none of the states above show a truly progressive tax system, in which the percentages would get larger as we move down the chart into higher income brackets.

Note also that all of the ideas we've heard so far for improving public goods and services in South Dakota—fuel taxes for roads, sales taxes for teacher pay—are regressive taxes, which will take a larger percentage of lower-income folks' income.


  1. Steve Sibson 2015.01.15

    The SDGOP tax and spend socialist highway funding plan is only going to make the tax burden on the middle and lower classes worse. And you watch this deceived fools telling Keloland news that they are OK with it.

    And you Democrats can also share the blame by promoting the idea that only radical Tea Party conservatives are against tax increases. The masses are being played like fiddles.

  2. larry kurtz 2015.01.15

    Cory, South Dakota is a failed state by design: you can't possibly be surprised by any of this, are you?

  3. Sam 2 2015.01.15

    We tax the essentials like food and clothing, that alone I belive lowers are ranking. We are seeing the long terms effects of decades of GOP good ole boy network.

  4. Steve Sibson 2015.01.15

    Looks like Montana has it right.

  5. Wayne B. 2015.01.15

    On this rare day, I wholeheartedly agree with Sibby.

    If everyone in SD was paying 6%, that would be equitable.

    If my family falls back into a lower quintile, maybe moving to Montana is a truly viable option... the trout fishing and elk hunting sure is a bonus!

  6. Steve Sibson 2015.01.15

    So Larry, are you ready to join forces to implement the Montana model here is South Dakota? I need to do more research first, but looks like that work would be worth while.

  7. Jenny 2015.01.15

    This is not surprising at all. SDs a rough place to be poor amongst other things.

  8. Nick Nemec 2015.01.15

    The keystone of the Montana system is an income tax. Doesn't bother me but it'll make the pigs squeal if one is attempted in SD.

  9. larry kurtz 2015.01.15

    Exactly, Nick.

    Sibson, just saw your comment: you are not a partner, you're an albatross lashed to Cory's neck.

  10. Wayne B. 2015.01.15

    But notice, Nick, Montana's keystone is a replacement of, not addition to, other taxes, as a proportion of income. Montana's income tax is barely progressive - the brackets max out at 6.9% at $16,700. They don't have a sales tax, and their property taxes are darn low compared to ours.

    Montanans apparently don't mind passing on the opportunity to fill the tax coffers with tourist dollars. Should we do the same?

  11. leslie 2015.01.15

    omg. it was prolly a tactic to get somebody to bite.... now we may never know. thank god

    6% for everybody except the "one percent" who nationally should pay $332 billion in financial transaction tax.

  12. Nick Nemec 2015.01.15

    You're right Wayne B.,
    income tax and none or lower other taxes has created essentially a flat tax in Montana. Not a progressive tax but better than a regressive one.

  13. Deb Geelsdottir 2015.01.15

    MN taxes the top 1% highest, followed by Iowa and then Nebraska. Still, all 3 tax the poor higher. That's simply morally wrong.

  14. Jenny 2015.01.15

    MNs is the fairest, but it is still wrong that the poor still pay more than the top 1%.

  15. Jenny 2015.01.15

    Making sure the rich pay their fair share is how a state gets billion dollar surpluses, folks. Smart government in MN, thanks to those Democrats.

  16. caheidelberger Post author | 2015.01.15

    Larry, not surprised, but compelled to continue reporting and educating.

  17. caheidelberger Post author | 2015.01.15

    Wayne, really? Montana implemented the income tax as a replacement for the other taxes? Dang: that's where I started a decade ago with my support for a state income tax. And if we followed the Montana model, as Steve calls it, we get a lower percentage of low-income folks' income and a higher percentage of wealthy folks' income... which means we would get more revenue, since the highest 20% have a lot more wealth than the lowest 20%.

    Do we have enough economic data to engineer a hybrid income-sales-property tax system to take the percentage slices listed for Montana above or to achieve any other preferred bracket-percentage model? Or would we just want to copy the tax statutes of Montana and hope they produce similar bracket-percentages here?

    Larry, Montana has as many Tea Party folks as South Dakota, doesn't it? If they can pass an income tax, why can't we?

  18. larry kurtz 2015.01.15

    Cory, Montana's legislature meets every other year for one thing: if South Dakota's ever met again it would be too soon.

  19. larry kurtz 2015.01.15

    Citibank is in the news, Cory: follow the money.

Comments are closed.