Our traditional model has left many wage earners behind. The populist alternatives could make that worse.

South Dakota likes to tell itself a simple story: low taxes, small government and fiscal discipline have produced one of America’s best-run states.

There is truth in that. South Dakota ranks near the top in tax competitiveness, has no personal or corporate income tax, maintains balanced budgets, carries AAA bond ratings and operates one of the best-funded public pension systems in the country. Government spending remains relatively lean. By many conventional measures, the state looks like a model of fiscal restraint.

That is the South Dakota success story. But there is another side to it, one that deserves more honest discussion.

Our Traditional Approach Isn’t Perfect

South Dakota’s economic model has produced stability, but it has not consistently produced the kind of broad-based wage growth that helps ordinary working families get ahead.

The state ranks near the bottom in teacher pay and remains weak in research and development, venture capital, patents, university research and other drivers of innovation. These are the sectors that tend to create higher-paying jobs and stronger wage growth over time.

South Dakota also has one of the most fragmented systems of local government in America. For a state with fewer than one million people, it maintains 66 counties, roughly 147 school districts, hundreds of townships and multiple overlapping layers of government. A state that prides itself on small government may, in practice, operate a surprisingly inefficient version of it.

Business Owners and Farmers Have Done Well

Income statistics tell a similarly mixed story. South Dakota’s per-capita personal income often looks respectable, but that figure includes farm profits, land wealth, business income, investment returns and retirement income. Agriculture, banking, land ownership and specialized sectors help lift statewide averages. But averages can conceal an important distinction.

South Dakota does a reasonably good job generating wealth for people who own land, businesses, investments or specialized enterprises. It does a less impressive job generating higher wages for people who simply work for a living. That distinction matters.

Wage Earners Are Left Behind

Many wage earners—teachers, service workers, public employees and middle-class families—do not experience the prosperity implied by the state’s headline economic statistics. Median household income remains more middle-of-the-pack than exceptional, while housing, healthcare and everyday living costs continue to rise. Our percentage of working moms is among the highest to make ends meet. Many of the larger employers brought in by our economic development efforts offer more of the same low paying jobs. For many South Dakotans, low taxes alone do not feel like economic opportunity.

Misguided Solutions

That frustration helps explain the new populist skepticism now aimed at economic development tools such as tax increment financing, infrastructure partnerships, industrial recruitment, pipelines and other growth-oriented projects. Some go even further, proposing ideas such as eliminating property taxes that pay for schools, sheriffs and jails.

Some skepticism is healthy. Incentives can be abused. Public-private partnerships deserve scrutiny. But South Dakota’s populist backlash often seems to assume that simply saying “no” will somehow produce better outcomes for working families. That is a dangerous illusion.

We Don’t Invest in the Future

South Dakota has never been a major research economy with deep venture capital networks, world-class universities or large concentrations of high-wage innovation industries. Its traditional formula has relied on low taxes, low costs and selective development tools to attract growth.

One legitimate criticism of that formula is that it has often produced too many modest-paying jobs and too few of the higher-paying opportunities that help families build real financial security.

But if South Dakota underinvests in research, innovation and human capital, and also turns against many of the tools it uses to create growth, what exactly is left to produce better wages? That is the real question. We are not investing in the creation of a better tomorrow for ourselves and our kids.

We Need a Better Option

South Dakota’s long-term economic model has not done enough for ordinary wage earners. But the populist alternative now emerging in parts of the state could make that problem worse by rejecting growth without offering a credible replacement.

Fiscal discipline matters. Skepticism matters. But the true test of economic policy is not whether government is cheap. It is whether ordinary people who work hard for a living have a realistic chance to get ahead.

South Dakota should demand better than a false choice between a model that has not delivered enough for wage earners and a backlash that could leave them even further behind.