States of the Week: The Dakotas and Taxes

By at 14 August, 2017, 9:41 am


by Raymond J. Keating-

Small Business Policy Index 2017: South Dakota ranked 3rd best among the 50 states. North Dakota ranked 21st among the states.

SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2017: South Dakota ranked 3rd best among the 50 states. North Dakota ranked 16th among the states.

SBE Council’s “Small Business Tax Index 2017” ranks the states according to 26 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

As Members of Congress and the White House move ahead on tax relief and reform, they should take a look at the examples set by the two Dakotas – South Dakota and North Dakota.

First, South Dakota ranks third best on SBE Council’s “Small Business Tax Index 2017.” Why? The keys are that South Dakota imposes no personal, individual capital gains, corporate income, corporate capital gains and death taxes. That’s a major competitive advantage for the state.

Second, North Dakota has dramatically improved its state tax system in recent years, thanks to substantive reductions in personal and corporate income and capital gains taxes.

Specifically, the individual tax rate dropped from 5.54 percent to 2.9 percent, with the capital gains tax rate declining to 1.74 percent; and the corporate income and capital gains tax rate fell from 7 percent to 4.31 percent.

So, North Dakota benefits from the lowest state personal income and individual capital gains taxes, among states that inflict such levies; and low corporate income capital gains taxes. It also imposes no death tax, and has low property taxes.

Our federal elected officials in Washington, D.C., would do well in following the examples set in South Dakota and North Dakota when it comes to implementing pro-growth tax changes.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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