South Dakota’s Tax Burden Ranks 2nd Lowest in the Nation

2016State-LocalTaxBurdenSouth Dakota is at the top of the list again (or perhaps I should say bottom of the list, since we are #49 on this list)! The Tax Foundation recently released their report of State-Local Tax Burdens for FY 2012, finding South Dakota had the 2nd lowest burden in the nation (up from 3rd in 2011).

Only 7.1% of the average South Dakotan’s income was paid to state and local taxing authorities in 2012 versus the national average of 9.9%.

Here are the report highlights:

  • $4,420 of annual earnings in the U.S. were paid out for state and local taxes.
  • $3,318 of annual earnings in South Dakota were paid out for state and local taxes.
  • Out of South Dakota’s $3,318 tax burden:
    • $1,911 was paid to in-state tax authorities (2nd lowest)
    • $1,407 was paid to out-of-state tax authorities (Nationwide, 22% of all state and local taxes were collected from nonresidents in 2012).
  • $46,781 was South Dakota’s per capita income in 2012 (16th Highest)
  • The only state that ranked better than South Dakota was Alaska (6.5%)

The five states with the highest state-local tax burden were:

  • New York (12.7%, $6,993)
  • Connecticut (12.6%, $7,869)
  • New Jersey (12.2%, $6,926)
  • Wisconsin (11.0%, $4,734)
  • Illinois (11.0%, $5,235)

The report states that generally, there are three reasons why a state’s ranking could change from year to year. First, there could have been a change in total collections by the state, either due to policy changes or economic fluctuations. Second, there may have been a change in the level of state income due to changing economic conditions. And third, other states to which residents pay state and local taxes could have seen changes in tax collections (again due to changing policy or economic conditions).

In 2012, state incomes on average rose in real terms. The average total tax burden also rose, but by a lower amount than the increase in income. This translated to lower tax burdens as a share of state incomes compared to 2011.

2012TaxBurdensMap-01



Categories: Rankings

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