Doing Better Than We Think In South Dakota

by | Feb 4, 2013 | Money Psychology, The Economy, Weekly Column | 1 comment

SD MapSouth Dakotans have a long-established money script that “we are a poor state.” Everyone in the state knows it, and we’ve always had the facts to prove it. We’ve grown accustomed to being at the lower rungs of almost any financial measurement.

I’m a third-generation South Dakotan. I’ve watched most of my classmates move out of state to take jobs that paid several times what a similar job paid in South Dakota. Staying here meant you would probably never earn much or achieve much, and those who did typically framed it as a “lifestyle” decision.

But a funny thing happened on the way to the poorhouse. The average per capita income of South Dakotans rose from 36th in the nation in 2000 to 13th in 2011. Our 2011 average of $44,217, up from $27,865 in 2001, was 6% higher than the national average.

Of course, this doesn’t mean every person in the state saw an increase in income. The most recent per capita figures include a couple of prosperous years for South Dakota farmers. Yet low unemployment rates and other indicators point to a general trend toward prosperity.

By now, most of my local readers have dropped this article in utter shock and disbelief. The notion that we are not a poor state is, well, not South Dakotan. Part of being a South Dakotan is being poor and last in “everything.”

An article by Jon Walker of the Sioux Falls Argus Leader, republished in the Rapid City Journal on November 26, 2012, quoted Dusty Johnson, chief of staff for Gov. Dennis Daugaard: “The reality is we’re not a poor state, and that is an important change in our perception.”

Given the strength of our statewide money script, it will take a generation or two to stop thinking of ourselves as one of the poorest states in the nation.

Yet there’s one South Dakota belief we might not want to get in a hurry to change. That is our resistance to raising taxes.

This reluctance isn’t because state and local taxes are already so high. South Dakotans have the fifth lowest overall tax burden of any state. We pay no individual or corporate state income tax, no state inheritance tax, and no personal property taxes.

Over the years, South Dakotans have overwhelmingly opposed an income tax. Several statewide votes to enact an income tax were soundly defeated. Perhaps we figured we didn’t have enough income to tax.

Or maybe we intuitively understood that taking more out of the pockets of consumers wasn’t the path to prosperity. In a country newly focused on extracting every dollar possible from “the rich,” South Dakota’s legislators of both parties seem more willing to cut budgets than raise taxes. The same article cited above quoted long-time Democratic state representative Bernie Hunhoff as saying, “We are just not inclined to raise taxes in South Dakota. Neither party wants to.”

An economic principle that our legislators seem to take to heart is that high taxes don’t create prosperity. This is especially crucial if your economy isn’t robust, which has often been the case in South Dakota.

As the income and wealth of South Dakotans increase, I hope we move beyond seeing ourselves as a poor state. I also hope we don’t forget all the economic principles that have served us well in lean times. We create wealth by producing, which is driven by economic incentive. Take away economic incentive and production decreases.

In South Dakota, we call this commonsense economics. Our federal government could use a little of that same common sense.

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