#4 South Dakota

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The overall freedom ranking is a combination of personal and economic freedoms.

From 2012

Top 5 States

State Facts

Net Migration Rate (?) 2.5 % 
Personal Income Growth (?) 3.89 %
How does the freedom ranking relate to these?


South Dakota is a quintessential “deep red” state with a vast gulf between its economic and personal freedom. The state has been growing like gangbusters for at least 20 years, but lawmakers might also consider whether man can live by money alone.

South Dakota’s fiscal policy is excellent. It has one of the lowest tax burdens in the country, and both state and local tax burdens have fallen over time. It is also relatively fiscally decentralized, and South Dakotans do have some choice among local jurisdictions (1.2 effective ones per 100 square miles). State and local subsidies and debt are well below national averages, while public employment is just below the national average, at 13.1 percent of private employment. We register a fairly significant reduction in debt since FY 2009.

South Dakota’s regulatory policy is also well above average, but it has not improved much, even discounting the PPACA, since 2000. Land-use freedom is extensive, and housing supply is elastic. Labor law is generally good because of right-to-work and other provisions, but a very high (for the local market) minimum wage was enacted by ballot initiative in 2013–14. Telecommunications have been liberalized, but statewide video franchising has not been enacted. Multiple indicators suggest the extent of occupational licensing is a bit below the national average, even as it has increased with time (like everywhere). Nursing practice freedom is, however, subpar. Insurance freedom is mediocre, as the state has held out against the IIPRC and has enacted a rate classification prohibition. However, South Dakota is mercifully free of a variety of other cronyist entry and price regulations, including a CON law. The state’s civil liability system is above average and has improved slightly over time.

South Dakota’s criminal justice policies surely qualify as draconian. For its crime rate, it imprisons far more than it should. Drug and other victimless crime arrest rates are all above national norms, however measured. Asset forfeiture is virtually unreformed, though local law enforcement does not participate much in equitable sharing. The cannabis law is harsher than in most states, though not the harshest. The state takes DNA samples from nonviolent misdemeanant suspects without any judicial process. Some legal gambling takes place. Private school and homeschool regulations are not as burdensome as those of the neighbor to the north, but without any school choice programs its educational liberty is below average. Smoking bans are extreme, and tobacco taxes are relatively high. As of 2014, the state had not yet been forced to legalize same-sex marriage, and it had a super-DOMA. In future years, the state should improve (see Appendix Table B17). South Dakota is one of the best states in the country for gun rights. Alcohol freedom is also fairly extensive, but direct wine shipments are banned.

Policy Recommendations

  • Fiscal: Trim spending on employment security administration, natural resources, and parks and recreation, areas far above national averages. Eliminate the business income tax.
  • Regulatory: Amend the constitution to require a supermajority (say, 60 percent) to pass any new regulatory infringement on the rights of private citizens through the initiative process.
  • Personal: Reduce the arrest rate for victimless crimes by prioritizing police resources toward solving violent and property crime.
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