The Truth About South Dakota’s Property Taxes and Government Spending

Would you vote for a politician who could guarantee you would pay less taxes than people do in 45 of the 50 states?  Sound too good to be true?  Read on.

Such a plan would have to find the right balance between sales tax, property tax, excise tax and income tax. 

On the worst end of the spectrum, is Hawaii with a 13.92% total tax burden.  On the other end, Alaska, with a total burden of 4.93%

Taxes fund government services such as roads, emergency response, schools, utilities, courts, social services and costs related to expansion, such as extending infrastructure.

Every election cycle needs its villain. Sometimes it’s Washington. Sometimes it’s “the elites.” And in South Dakota, it’s property taxes —as if we’re living under some Scandinavian-level tax regime.

Except we’re not. Not even close.

Let’s start with actual data, because facts don’t lie.

When you look at overall state and local tax burden — property taxes, income taxes, sales taxes, excise taxes, the whole package — South Dakota ranks fifth from the lowest in the entire nation. Forty-five states take more from their residents, measured as a share of personal income. Only Alaska, Wyoming, New Hampshire, and Tennessee are lower.

But that’s not the message in political ads. The message often is – Mrs. Smith is being taxed out of her home due to property taxes. But that doesn’t tell the whole story.  First, Mrs. Smith is a widow and collects only social security.  She didn’t invest, she didn’t belong to a career pension program and she didn’t have rich relatives.  An all too common story.  Plus, she is still living in the family home with four bedrooms, three baths on 5 acres.  Property values have indeed increased and likewise so have government budgets.

I hate it when people try to argue both sides of the argument, presented as one.

• For example, on one hand: Mrs. Smith should not be taxed out of her home.  The government should do something for her so she can live there unburdened from tax obligations. On the other hand:  Government welfare is wrong.  Let those people sink or swim.
• Another: On one hand, Families are struggling with inflation and need more income just to maintain the same standard of living. On the other hand, we’re told government spending is “out of control” and must be rolled back to pre-inflation levels.

These two claims cannot both be true in isolation. If inflation increases the cost for food, labor, fuel, and materials for households, it does the same for government. Roads do not get cheaper to build, employees do not cost less to pay, and infrastructure doesn’t revert to 2019 prices simply because we wish it would.

These two claims cannot both be true in isolation. If inflation increases the cost for food, labor, fuel, and materials for households, it does the same for government. Roads do not get cheaper to build, employees do not cost less to pay, and infrastructure doesn’t revert to 2019 prices simply because we wish it would.

What’s truly baffling is how the loudest complaints about “runaway government spending” often come from the same people who complain that roads are falling apart, infrastructure isn’t keeping up, and services aren’t good enough. Government is somehow spending too much and not doing nearly enough.

Now enter legislative and gubernatorial candidates promising to eliminate property taxes. These proposals are usually light on detail and heavy on applause lines. Rarely do they explain what stands to get cut instead: schools, counties, roads, or emergency services. Or do we just assume the money fairy fills the gap?

Property and other taxes fund local government — schools, counties, townships, and infrastructure people rely on daily. You don’t fix that by removing the load-bearing beam.

We can’t have it both ways.  Government experiences Inflationary increases just like every other entity or individual. Those increased costs are passed down to the customer, just as it is with every other entity. Only when it’s government, it’s a sin.  

So when I hear breathless rhetoric about South Dakota being “taxed to death,” I have to ask: Compared to whom? Hawaii? New York? California? Vermont? Those states have nearly double the overall tax burden South Dakotans carry.

Property taxes have become the political equivalent of a haunted house: scary sounding, emotionally charged, but wildly disconnected from reality. Are property taxes noticeable? Of course. They arrive in one or two big bills, which makes them feel painful. But feeling pain from a tax is not the same as being overtaxed.

South Dakota is one of nine states that have no personal income tax. States without income tax fund government differently, leaning more heavily on sales and property taxes. Only two of those states have lower property taxes than South Dakota – Nevada, with 6.85% sales tax and Tennessee with 7.0% sales tax. South Dakota sales tax is 4.2%.  

Here’s the uncomfortable (for political candidates) truth: South Dakota is not a high-tax state. It’s not even a medium-tax state. It is one of the lowest-taxed states in the nation.

We are fortunate to live in a state that has kept taxes low while still functioning. That balance won’t survive unserious policymaking fueled by manufactured outrage.

South Dakota isn’t a cautionary tale of over taxation. It’s a reminder of how easy it is to complain loudly even when the numbers say we’ve got it pretty good.

Primary Source:  Tax Burden by State in 2025