April 18, 2004
State can't afford
income tax cut
SC Statehouse Report
18, 2004 - - For a dozen years, South Carolina lawmakers have
been playing a dangerous, intoxicating game of one-upsmanship
that is hurting the long-term stability of the state.
Every year, the allure of another hit of political crack
drives them into a frenzy to figure out new ways to cut taxes.
It's almost as if they cut taxes just to say they've cut taxes
- - without taking long-term implications into mind.
Individually, the cuts don't seem like much - - $6 million
here, $40 million there. But added together, they are draining
the state budget to dangerously low levels so that lawmakers
struggle to have enough money every year to fund basic services.
FY91 - FY02
impact in millions)
(If table is hard to read, switch your
browser to medium or normal view)
Amended SC withholding tables
Capital gains phase-in
Exemption children under 6
Economic impact zones
Extension of S Corps
Job development fees
Credit IRA taxes paid other sts.
New F Class bingo license
Aiken/Barnwell Redev. Auth.
College tuition credit
Volunteer firemen's deduction
Habitat management credit
Capital gains one-year holding
Credits for high-tech industries
Conservation easement credits
Community dev. corps
income tax cuts
tax rate, 6% to 5%
Enterprise Zone credits
Moratorium in some counties
Discount to out-of-st. retailers
Credit for uncollectible sales
Sales tax holiday
1-cent reduction on food
tax exemption phase-in
Gift tax repeal
Motor vehicle inspection repeal
Soft drinks tax phase out
Sunday sales alcohol licenses
Misc tax savings
Office of Research and Statistics, State Budget and
Control Board, 4/12/04
Since 1991, state lawmakers have approved income, sales,
estate and other tax cuts with a cumulative impact of $5.1
billion - - yes, with a B - - in revenues, according to calculations
by state economist Bill Gillespie. In other words, they approved
lower taxes over 12 years that would fund virtually all of
this year's budget - - and that's not even taking into account
the $500 million they'll spend this year on property tax credits
The political rhetoric for tax cuts is familiar - - you return
the money to people and they'll use it in the economy, which
will spur more growth and jobs.
Using this logic, why then is South Carolina in an economic
recession? Lawmakers have created billions in tax cuts, but
the state still is high in unemployment and lost manufacturing
"If tax cuts will strengthen the economy, then we should
have a red-hot economy in South Carolina," said Senate
Minority Leader John Land, D-Manning. "We've cut corporate
income taxes, $50,000 on homestead exemption, one cent off
on food. The list goes on and on."
Now comes Gov. Mark Sanford's plan to cut income taxes by
0.225 percent increments from 7 percent to 4.75 percent in
years when state growth is at least 2 percent. Although a
Senate Finance subcommittee has boosted the growth leve l
to 3 percent before a cut would kick in, the logic remains
the same: it returns money to people to help them pump up
Sanford's proposal would cut state revenues by $62 million,
although he says the simultaneous stimulus effect from growth
would add $100 million more. On a practical level, here's
how much the cut would mean to the average individual with
$30,000 in taxable income: About $68 per year.
In my book, $68 per year isn't going to stimulate an economy
out of recession. It might keep some folks in beer and junk
food over a Super Bowl party, but it's not going to have a
What's more dangerous for this and other tax cuts is they
add to the downward spiral in state revenues. Instead of allowing
state revenues to keep up with the economy through growth,
a future-oriented income tax cut would flatten state revenues
over the long haul. In other words, as the state started to
turn around - - and generate some revenues that might help
mitigate three years of big spending cuts in basic services
- - this year's legislature would tie the hands of future
legislatures by taking away some of the growth effect to state
Over time, that would tend to make state budget growth flatter.
And as health care costs, education costs and other services
become more expensive due to inflation, the state budget wouldn't
be able to keep up through growth. In turn, that would mean
more cuts and fewer necessary services.
It's nice for lawmakers to give cuts to their rich friends,
but more tax cuts will hurt working people disproportionately
over time. Right now, South Carolina can't afford more tax
cuts, particularly the governor's income tax cut that would
stymie future budgets.
4/18: Just in the nick of time
This week's cartoon by our Bill McLemore:
SOUTH CAROLINA SCORECARD
Here's a "thumbs up" and "thumbs down" related to various
political events from the past week:
Carroll Campbell. Hats off to the former governor
for writing each of the state's senators to ask them to reduce
cuts to the state Department of Natural Resources, which faces
another year of crippling cuts.
Improved forecast. It's good news for state senators
that tax collections are up because it gives a little more
breathing room in continued tight times.
Fetus rights. Thumbs down to Reps. Greg Delleney and
Scott Talley for approving a bill at subcommittee level to
give constitutional rights to fetuses. House Judiciary Chairman
Jim Harrison voted against the proposal because he knows what
anyone with common sense knows -- that the measure is unconstitutional
on its face.
SC House. Last year's vote to get the Dixie Chicks
to apologize for a statement criticizing President Bush backfired
this year as the House won an award to highlight its curb
of free speech.
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