South Dakota is among several states that are havens for the nation's richest
RACHEL MARTIN, HOST:
The massive trove of documents known as the Pandora Papers revealed that more than a dozen U.S. states have become havens for some of the world's wealthiest people to shelter billions of dollars. At the top of that list - South Dakota.
Joining us now is Lee Strubinger. He's the politics and public policy reporter for South Dakota Public Broadcasting in Rapid City. Good morning, Lee.
LEE STRUBINGER, BYLINE: Hey. Good morning.
MARTIN: So one might think international tax shelter, and one might conjure someplace in Europe or an island nation. How did South Dakota get on this list?
STRUBINGER: Yeah. So the important thing to realize is that this has been going on here for a long time. There were major steps taken in both the 1980s and the 1990s that established the state as a place that's very friendly to banking and the trust industry, which has really only grown since then. First, South Dakota became one of the first states to remove the rule against perpetuity, which means here people and estates can control their assets long after they've died. Then, in the late 1990s, Governor Bill Janklow established a task force to make the trust law more favorable to attract money to the state. And that task force still meets to this day and is made up of members from the trust fund industry, state lawyers and bankers, et cetera.
MARTIN: What kind of say do state lawmakers have in this task force?
STRUBINGER: Yeah. So every year, the state legislature votes on a kind of maintenance bill. Its focus is always to make sure that South Dakota stays favorable for people to keep their money in. However, these bills are often complex and involve amending current state law that is also really complex to understand. Because South Dakota has essentially a part-time citizen legislature, it relies on experts like those on the trust fund task force to help them with these complex topics. Even members of the committee, when these bills come up, say they don't entirely know what they're voting on. Here's Sioux Falls State Representative Doug Barthel earlier this year.
(SOUNDBITE OF ARCHIVED RECORDING)
DOUG BARTHEL: Well, I wish I understood all this like a lot of our experts do, but I don't. But this is the fourth year in a row that I've dealt with this. And I was told on Year 1 by former Representative Lust that - he said, trust me on the trust.
STRUBINGER: And this bill that Barthel is talking about, it sailed through the Legislature and was signed by the governor with little to no question.
MARTIN: So now that the Pandora Papers have been released, what's been the reaction in South Dakota?
STRUBINGER: Yeah, it's been mixed. You know, critics of the state's trust industry say that lawyers on the task force really have their message kind of buttoned down and that lawmakers don't question the details. I spoke with former Democratic state lawmaker Susan Wismer yesterday, who described it like waving a magic wand.
SUSAN WISMER: Even though the legislators do not have a clue what it is they're really voting on, other than that these attorneys that deal with big money are telling them that it's good for South Dakota's economy to do this.
STRUBINGER: And like Wismer said, you know, lawmakers see this as an issue about the economy. South Dakota, for decades, has tried to remain as friendly to the banking industry as it can. The trust industry here supports roughly 400 jobs. The prevailing logic surrounding the trust industry in the state among lawmakers is that wealthy people are going to store their money somewhere, so why not here? On top of that, the trust industry doesn't cost the state a dime because the industry even pays for its own regulation. Those costs to the state for audits are picked up by the company itself.
MARTIN: Lee Strubinger of South Dakota Public Broadcasting, thank you. We appreciate it.
STRUBINGER: Yeah, you bet. Transcript provided by NPR, Copyright NPR.