S.C. Statehouse Report
Dec. 7, 2003
Look behind the rhetoric
of tax reform
SC Statehouse Report
DEC. 7, 2003 - - For all of you who think you pay too much in taxes
in South Carolina, let's get this straight: You don't, compared
to other states.
ask a retiree who has just moved here from tax-high states like
Connecticut, New York or Massachusetts. Or look at how the non-partisan
Tax Foundation (http://www.taxfoundation.org/)
rates the tax burden faced by South Carolinians.
According to the Foundation's 2003 study, South Carolinians rank
38th nationally when state and local taxes are compared across states.
Residents pay 9 percent of income in state and local taxes - - $2,428
per capita on average per capita income of $24,911. Compare that
to Maine (#1), where residents pay 12.2 percent of income to state
and local governments - - $3,519 per capita on average per capital
income of $28,960.
You might argue that when you add federal taxes to the mix, South
Carolinians pay more. Nope. With those added, the state's rank drops
to 41st in the nation.
South Carolina economists, in fact, say the state's current tax
structure is something of a model for many in the nation because
it is balanced. It relies on three major taxes - - income, property
and sales - - in approximately equal proportions. The advantage
in having the tax load spread in three balanced revenue streams
is that it provides stability and allows the negative aspects of
one tax to be balanced by the upsides of other taxes.
WORLD: A real holiday treat
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"When you push a particular tax really hard (use it to make
up more of the burden), it magnifies its negative attributes,"
Clemson economist Holley Ulbrich said.
If, for example, the state were to decrease income taxes and make
up the difference with property taxes, a higher burden would be
put on people who own property - - they'd pay more, which could
hurt older people with assets and retirees moving into the state,
according to Randy Martin, chairman of the economics department
at USC's Moore School of Business. Also, pushing the property tax
could discourage business investment and improvements.
Or if the state were to decrease income or property taxes and make
up the difference with sales taxes, retail businesses and tourism
could be impacted negatively, Ulbrich said. Martin added that moving
to more of a sales-tax based system would also put more of the burden
on people who spend a higher percentage of their income - - poorer
people - - to the advantage of those with more money who can save.
"You kind of get bit in the rear end any way you go, except
with a mixed tax structure," Martin said.
So the economics lesson for South Carolina is its current three-legged
stool of taxation is balanced. Interfering with it may cause it
to teeter with negative impacts, including some people paying more
Unfortunately, the coming session of the General Assembly will
be filled with politicians hailing the holy mantra of tax reform
to "fix" the system.
Gov. Mark Sanford proposes increasing the cigarette tax to lower
the income tax on richer people. Over time, his plan calls for growth
to fund the differences in revenues stemming from the lower income
House Majority Leader Rick Quinn, R-Columbia, and the conservative
SC Policy Council have been barnstorming the state with a plan to
raise the sales tax by two cents for education, reduce school property
taxes and cut millions in sales tax exemptions. In general, this
plan would take funding of schools away from local governments and
move it to the state.
State Sen. David Thomas, R-Greenville, wants to boost the sales
tax by two cents to reduce property taxes on homes and cars.
Over the next few months, just about everywhere you look politicians
will have plans to reform taxes. And while no one really likes paying
taxes, fiddling with a system that's balanced could create serious
inequities for many and erode the relative stability the state enjoys
with its taxing structure.
A real holiday treat
This week's cartoon by our Bill McLemore: