Over the past few weeks, Yankton did its bit to shine a favorable light on usually-overlooked South Dakota by successfully hosting two global archery championships that were well received by those involved and focused the eyes of the world on this state.
However, that was one bright piece of PR positivity amid a recent storm of critical news and revelations.
At first, much of it swirled around Gov. Kristi Noem, who has become the face of our state to the country. The Associated Press reported last week (geez, was it only last week?) that she apparently used her influence in a real estate appraisal licensure meeting involving her daughter. This was followed by a national conservative news website accusing the governor of having an affair with dubious former Trump advisor Cory Lewandowski, who has had other unseemly troubles recently, with Noem tied to that mess, too. She also had to backtrack on the controversial rewriting of social studies standards for the state’s schools, an effort that drew criticism from various sides for conflicting reasons; she subsequently decided to start the whole process over. All this put this state under a harsh microscope.
This week, however, an even bigger shoe dropped.
An exhaustive study by the International Consortium of Investigative Journalists produced the appropriately titled “Pandora Papers,” which chronicles how international wealth has been hidden within the U.S. to avoid taxes. South Dakota is now viewed globally as a prime tax haven, mentioned in the same breath as the Cayman Islands, renowned as a place where industrial elites and the super-rich can move their wealth to avoid paying taxes — the same kind of greedy behavior U.S. politicians usually rail against when given the chance. Eighty-one of the 206 U.S.-based trusts listed in the report are in South Dakota.
This news has sparked numerous media analyses and even some “exposure” on late-night talk shows. A withering article published on the progressive New Republic website this week tore into South Dakota’s standing as a wealth hideout, damning the state as a “moral sewer” while noting that “South Dakota’s lax financial regulations are also … fantastic enablers of illegal or brazenly immoral activity unrelated to tax-dodging.”
It makes the feel-good days of those archery tournaments seem so long ago.
The Pandora Papers report is also notable because South Dakota’s standing as an opaque tax haven is no accident. It began in the early 1980s when the state changed its interest rate ceiling laws to allow credit card giant Citibank to move in and feast on those rates charged to customers. Over the years, other rules impacting trusts and other investments turned the state into an attractive black hole in which wealth could be stowed away. To put it in brighter monetary terms, “South Dakota offers the best privacy and asset protection laws in the country, and possibly in the world,” according to tax expert Harvey Bezozi, as reported in the Guardian of London.
According to Axios, assets tucked away in South Dakota have ballooned from $57 billion a decade ago to $360 billion today.
Some of the response here to the Pandora Papers report hasn’t exactly been one of shock. Senate Pro Tempore Lee Schoenbeck of Watertown defended the practice, telling the Forum News Service, “I haven’t had any complaints about the careers and opportunities the trust industry has created in our state. I imagine the folks that aren’t getting those careers in their jurisdictions aren’t too happy.” Also, an online South Dakota conservative political blogger hailed the report with what could be described as a proud “Mission Accomplished” attitude.
Thus, South Dakota’s standing as a secretive tax hideout isn’t the byproduct of an unforeseen legal loophole. Instead, it’s the direct, planned consequence of those laws: years of policies that have, in the best South Dakota tradition, promoted a lack of transparency that is tempting and irresistible. In other words, the state welcomes investment — all states do — but isn’t too picky about from where and isn’t too concerned about the reasons. On its website, the South Dakota Trust Association heralds this as the “South Dakota Advantage.” And these hundreds of millions of dollars, some of it ill-gotten, flowing into South Dakota are good for our state, we’re being told.
And yet, we still won’t expand Medicaid to help its poorest citizens.
Our state ranks near the bottom in average median wages.
We are also among the leaders in the country in people working at least two jobs.
After a brief rise recently, our teacher pay has slid back to 50th nationally, just ahead of Mississippi, and we still can’t boost education funding to where it should be.
Six of the 25 poorest counties in the nation are in South Dakota.
Nevertheless, we’re supposed to appreciate the great good created by wealth that’s stashed away here by faceless, tax-evading titans utilizing state laws to help them game the system.
That’s what a lot of people see when they look at South Dakota this week: a state awash in hidden money, a place where no light is allowed to penetrate the shadows and where our leaders cheer this ethical darkness.
The next time one of our politicians speaks glowingly about “commonsense South Dakota values,” you might feel justified to cringe at what could be seen either as hypocrisy or a slap in the face.
Or, you can think back on the recent archery tournaments and the praise that the participants had for this community and its friendly people. It might help take the edge off whatever else you’re feeling about our state right now.
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