Saturday, March 05, 2011

Others' pain might be S. Dakota's gain

Kelly Thurman

Tax increases being implemented nationwide as states work to cover budget deficits could be to South Dakota's benefit in bringing businesses to the state.

As South Dakota and the nation slowly recover from the recession, state and local officials see potential in leveraging its business-friendly and low-tax status to attract more out-of-state companies who are looking to save money as it becomes more expensive to operate in their home states.

Coupled with a pent-up demand by companies that have held off with major expansions for years, South Dakota could stand to gain from other states' challenges.

The Governor's Office of Economic Development and the Sioux Falls Development Foundation separately are pondering plans to develop more direct marketing strategies focused on getting the word out about South Dakota in those specific areas of the country.

"To me, if we play our cards right, we can convince people, 'Hey, come here to South Dakota. We're a well-managed state,' " said Dennis Breske, president and CEO of NAI Sioux Falls, a commercial brokerage firm. Breske recently worked with a California company looking to expand in Sioux Falls.

South Dakota continuously is ranked near the top when it comes to its business-friendly tax structure. The state has no corporate or personal income taxes, nor does it have personal property, business inventory or inheritances taxes. While South Dakota is confronting its own budget deficit, legislators so far have been committed to balancing the budget without tax increases.
Looking to expand elsewhere

The opportunity to attract businesses comes from other states where the recession has hit hard and in some cases led to increases in state business taxes.

The Illinois Legislature, for instance, recently approved a plan to increase its individual income tax by two-thirds and corporate tax rate by 30 percent to help close a $13 billion budget deficit, a move some people say will undermine job growth and economic development in the state.

The increases don't mean every business is going to pick up and move, but companies probably won't be as interested in the state for expansions, said Kail Padgitt, economist with The Tax Foundation. That's good news for states such as South Dakota, though he cautioned that a state's tax structure is just one of several factors businesses consider.

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