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Wealth, South Dakota and the Social Contract

Oct 6, 2011

“There is nobody in this country who got rich on his own. Nobody.”

Elizabeth Warren, consumer advocate and Senate candidate from Massachusetts, thus blasphemes the American ideals of the rugged individual and the self-made man. We build and secure wealth, says Warren, in the context of a social contract. We pay taxes, and in return we get schools to educate workers and consumers, infrastructure to transport our goods and services, and police and banking regulations to protect our wealth.

South Dakota’s state government doesn’t quite dig how Warren’s social contract works. South Dakota’s wealthy businessmen depend on an educated workforce. However, South Dakota resists the notion that those wealthy businessmen ought to pay state taxes on their income. South Dakota state government also resists the notion that it should pay for the education that makes that wealth possible. South Dakota state government pays the second-smallest share of K-12 education funding in the nation, leaving federal and local governments to try filling the gap.

Rather than asking the wealthy to pay their fair share of the cost of civil society, we brag about our low state tax burden. This low-tax/no-tax mindset leads to the odd situation where our state’s wealth (as measured by GDP) can grow by over 4% in 2010, yet our depleted state coffers require that we cut education and other public services in 2011 by 6% to 10% or more. Meanwhile, we pave our roads and runways and care for our ill and elderly with federal assistance that exceeds by 50% the taxes we South Dakotans pay Uncle Sam.

Perhaps South Dakota’s tendency to take more from the social contract than it pays in flows from our history. Our pioneer forebears built the foundations of our wealth on government assistance. The U.S. Army executed the wars and enforced the treaties that cleared the previous inhabitants from the territory our forebears craved. Our forebears received their parcels of Dakota Territory through one of the greatest giveaways of public wealth in history, the Homestead Act. Railroads built with government subsidies and immigrant labor helped that wealth grow.

Since our first sod homesteads, no South Dakotan has gotten wealthy solely by his or her own efforts. We make and maintain our wealth thanks to the common efforts of citizens in society. We all thus have an obligation to pay taxes to support the public institutions that benefit all citizens.

Cory Allen Heidelberger writes the Madville Times political blog. He grew up on the shores of Lake Herman. He studied math and history at SDSU and information systems at DSU, and is currently teaching French at Spearfish High School. A longtime country dweller, Cory is enjoying "urban" living with his family in Spearfish.


01:53 pm - Thu, October 6 2011
dave tunge said:
I agree that our formula for taxes needs an overhaul. The 9-9-9 program, while I believe it has little chance of success, is a simple, fair process without the bureacracy and red tape.
People will always argue about what is fair and who they believe isn't paying their fair share. Always.
People will always argue about where the distribution of taxes will go. Always.
South Dakota runs a tight ship and I give credit to our legislature for not allowing us to follow in the footsteps of the states who have spent themselves to death. I don't believe our education system will suffer because our pioneering spirit and doing what is right will prevail.
While Cory is correct that no South Dakotan has gotten wealthy soley by his or her own efforts, that same statement holds true for any person or corporate entity in the world. The wealth that has been created "thanks to the common efforts of citizens in society" was largely due to the fact that hard working business people with ambition and a goal gave jobs to these citizens. Excessive taxes on these folks with money just because they have money puts them in the same bracket as the sin taxes of tobacco and alcohol. That somehow seems counterproductive.
03:59 pm - Thu, October 6 2011
Dave, you're falling into the same erroneous thinking I'm critiquing. You're trying to carve out some special entitlement for the fabled "job creators". Stop making myths. Wealth is not "largely" due to "hard working business people" or the special ambition of a handful of John Galts. Job creators are no more special than the job doers.
04:48 pm - Thu, October 6 2011
dave tunge said:
Admittedly, there are problems with our tax system than need fixed........and we will disagree on how to do that. If the job creators are no more special than the job doers would you agree that the lowest income job doers should be taxed proportionately to the job creators? Or should they be taxed at a lesser percentage because they are poorer?
A fair tax system will most likely never exist because, as I pointed out, fairness is interpreted differently. Rich folks want to keep their money and poor folks want some of it. While both sides of this issue contest the system Rule #1 will always appy: Those with the money make the rules.
Business owners aka job creators are far, far from any special entitlement but theirs simply break down to the "ant and the grasshopper" analogy.
04:38 am - Fri, October 7 2011
Ed Goss said:
How lucky we are in the state of SD to have one of the best economy's in these tough times. We must be doing something right so if it ain't broke don't try to fix ti.
07:23 am - Mon, October 10 2011
Bernie Hunhoff said:
The real job creators are the consumers (which is about as goofy of a name as "job creators") -- but it's true, jobs are created when a need develops -- whether it be public or private sector.

I'm increasingly convinced that the solution to most of our policy problems today is to GET MONEY OUT OF POLITICS AND GOVERNMENT. Money is cancerous to the process.

But right now ("corporations are people, etc.") we're going the other direction.

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