PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

STATE SPOTLIGHT: South Dakota is Big in Terms of Positive Policies for Small Business

By at 20 August, 2019, 10:03 pm

 

by Raymond J. Keating-

Small Business Policy Index 2019: South Dakota ranked 4th – or fourth best – among the 50 states.

SBE Council’s “Small Business Policy Index 2019” ranks the 50 states according to 62 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2019: Florida ranked 2nd – or second best – among the 50 states.

SBE Council’s “Small Business Tax Index 2019” is a subset of the Small Business Policy Index report, ranking the states according to a wide array of tax measures, including income, capital gains, property, death, unemployment, and various consumption-based taxes like state gas and diesel levies.

South Dakota might be relatively small in terms of population, but it’s big in terms of offering an excellent public policy climate for entrepreneurship, small business and investment.

SBE Council’s “Small Business Policy Index 2019: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth” ranks the 50 states according to 62 different policy measures, including assorted tax, regulatory and government spending measures. South Dakota ranked fourth best among the 50 states.

And the state earned the second best spot on the “Small Business Tax Index 2019,” which is a subset of the larger Policy Index, whereby the states are ranked on tax measures only.

As for the big positives, South Dakota imposes no personal, individual capital gains, corporate income, corporate capital gains and death taxes. The lack of such taxes in the state enhances the returns on working, starting up and operating a business, and investing in new and growing enterprises. That, in turn, is positive for economic, income and job growth.

For good measure, South Dakota tied for the lowest energy regulatory costs; is a right-to-work state; and has strong eminent domain protections.

And recent news on the policy front add to the positives. As reported in late July by Keloland.com, “The balance in South Dakota’s reemployment assistance trust fund [i.e., unemployment insurance] finished strong enough last month that the state’s tax rates for the program will go down in calendar year 2020… The cuts will be reflected in rate changes starting with the April 2020 payments.” The fund is projected to close 2019 with a balance of $137.4 million. As the state’s Labor and Regulation Secretary Marcia Hultman said, “It does point to a really strong economy and fewer people collecting benefits.”

While real state GDP growth in South Dakota lagged in recent years, growth picked up markedly in two of the last three quarters, and over the long haul, real GDP growth in South Dakota has run well ahead of national growth. For example, over the past 20 years, real GDP growth in South Dakota averaged 3 percent annually, compared to the national average of 2.3 percent.

Yes, failing to impose any income taxes and keeping other governmental burdens relatively low make a real difference for a state’s economy.

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

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