SD has lowest per capita tax burden in the region; highest sales tax burden, report says

By: Makenzie Huber - August 7, 2023 5:59 pm

The South Dakota House of Representatives chamber at the Capitol in Pierre. (Joshua Haiar/South Dakota Searchlight)

South Dakota residents bear the lowest tax burden per capita in the region, according to a report shared with lawmakers Monday. But residents also bear the region’s heaviest sales tax burden.

The Legislative Research Council, which provides legal and fiscal analysis for lawmakers, shared the report with the South Dakota Legislature’s Executive Board during a meeting in Pierre. The report compared South Dakota with Iowa, Minnesota, Montana, Nebraska, North Dakota and Wyoming.

South Dakota ranked just below Montana for the lowest overall per capita tax burdens in 2020. South Dakota’s total per capita tax burden that year was $4,466, while Montana was slightly higher at $4,471. North Dakota topped the list at $7,545.

South Dakota ranks just below Montana for the lowest per capita tax burden compared to surrounding states, according to a report from the Legislative Research Council on Aug. 7, 2023. North Dakota ranks first, followed by Minnesota, Nebraska and Wyoming. — South Dakota ranks just below Montana for the lowest per capita tax burden compared to surrounding states, according to a report from the Legislative Research Council on Aug. 7, 2023. (Courtesy of Legislative Research Council)

As for sales tax, South Dakota leads its neighbors with a per capita sales tax burden of $1,788. North Dakota is second highest with $1,732 per capita and Montana ranks last, since it does not impose a sales tax.

Forty percent of South Dakota’s total tax revenue comes from sales tax revenue, which “really demonstrates how much South Dakota relies on sales tax,” said LRC research analyst Will Steward.

South Dakota ranks first for its per capita sales tax burden compared to surrounding states. North Dakota follows closely, while Montana is the only surrounding state not imposing a sales tax, according to a report from the Legislative Research Council on Aug. 7, 2023. (Courtesy of Legislative Research Council)

South Dakota is the only state in the region that levies a sales tax on food, which Gov. Kristi Noem attempted to eliminate during the 2023 legislative session. Instead, legislators chose to cut South Dakota’s sales tax by .3%. There is an effort to bring a ballot measure in 2024 to repeal the food tax.

The report also analyzed income, corporate, property, severance and motor fuel taxes. South Dakota had the second-lowest property tax burden in the region. South Dakota and Wyoming are the only surrounding states that do not impose income taxes.

South Dakota and Wyoming do not impose income taxes. Minnesota leads the region for its income tax burden on residents, according to a report from the Legislative Research Council on Aug. 7, 2023. Iowa, Montana and Nebraska all have a tax burden just under $1,500 per capita. — South Dakota and Wyoming do not impose income taxes. Minnesota leads the region for its income tax burden on residents, according to a report from the Legislative Research Council on Aug. 7, 2023. (Courtesy of Legislative Research Council)

Steward cautioned lawmakers that there are several contributing factors that go into the total tax burden of a state, including population. “Fixating on individual parameters” without context could lead to “inaccurate conclusions, he added.

“Just looking at these individual parameters without looking at the broader tax structures around it could be a bit hazardous,” Steward said.

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Makenzie Huber

Makenzie Huber is a lifelong South Dakotan whose work has won national and regional awards. She's spent five years as a journalist with experience reporting on workforce, development and business issues within the state.