Why isn’t SD’s economy set to expand?

I guess the fact that SD is “business friendly” doesn’t necessarily mean that businesses actually want to, you know, do business here. The Argus Leader reports:

A new Forbes rating of the best states to do business ranked South Dakota near the top but held some surprising thoughts on the state’s growth prospects during the next five years.

Citing low business costs, Forbes ranked South Dakota as the 12th friendliest place to do business, with Utah taking the top spot. The magazine looked at a number of areas, including growth prospects, regulatory environment, business costs, quality of life, labor supply and economic climate.

South Dakota ranked first in business costs and ninth for economic climate. But the state ranked 45th for growth prospects, which surprised state officials.

Those surprised state officials are convinced that our poor ranking has to do with the metrics that Forbes uses to gauge potential for growth, which evidently give short shrift to smaller-state economies like SD’s. I wonder if our growth prospects aren’t dim precisely because we’re so “business friendly” – that is, our lovely right to work laws, widening income gaps, and absurdly regressive tax structure. Indeed, the latter is the cause of some consternation in Pierre as education and tax policy looks to take center stage in Pierre this coming legislative year:

Education funding and taxes will be on the Legislature’s agenda when it convenes next week, Sioux Falls-area lawmakers told business leaders Thursday morning…

Rep. Christine Erickson, R-Sioux Falls, and several other lawmakers emphasized low teacher pay, which they said could be leading great teachers to leave the state. But Erickson said she didn’t have any solutions about where to find new revenue to give to schools to raise salaries. She suggested reviewing existing programs for efficiency, in the hopes to freeing up more money.

Though an income tax, which some lawmakers like Rep. Paula Hawks, D-Hartford, support, is unlikely to be on the table, other taxes might be.

Economic Growth

Could higher (or for that matter ANY) income taxes actually help spur SD’s economy?

The absurdity of trying to find funding for basic public goods such as education in the absence of anything like a progressive taxation scheme was demonstrated this past November, when South Dakotans had to choose between increasing funding for Medicaid and K-12 education and raising already regressive sales taxes. (We chose not to raise sale taxes, although that may have been motivated more by a “NO TAXES EVAR” mindset than any concern for lower-income South Dakotans.)

If you really want to grow SD’s economy, you need to invest in education. A 2008 study by the Boston Chamber of Commerce found that businesses will do business whether taxes are high or not. What really spurs growth is a well-educated workforce. Moreover, an SD Board of Regents report found that every $1 invested in higher education in our state results in more than $10 of increased economic activity. That’s a pretty impressive return on your investment, and a good argument for increasing funding for all levels of education. Especially since SD’s cost of living hovers around the national average, but our K-12 teacher pay remains 51st in the nation.

To do that, you’re simply going to have to raise taxes. And to do that justly, you’re going to have to raise taxes on the wealthy. But given that widening income (and therefore power) gap I mentioned above, that seems an unlikely outcome of the next three months. It’s a pity that SD lawmakers are willing to shoot our state in the foot with regard to development (social as well as economic) in order to maintain a no-tax status quo.

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About sdpeacejustice

The SD Peace & Justice Center connects a grassroots network of South Dakotans working for social justice and against violence and oppression.
This entry was posted in Economic Justice, Education, SD Legislature 2013 and tagged , , , . Bookmark the permalink.

One Response to Why isn’t SD’s economy set to expand?

  1. Pingback: WSJ bemoans wealthy’s taxation plight | A Mighty Flood of Justice

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