Scoppe: How taxes go down while spending goes up

Associate EditorMarch 6, 2013 

 

— FOR MANY, it’s an article of faith: Taxes in our state are going up, and government is growing.

And little wonder, with elected officials from the governor on down constantly harping about how crucial it is to slash taxes and how awful it is for the Legislature to keep “growing government” — something we’re likely to hear another round of as the House prepares to debate next year’s state budget and the politicians, or at least the Republican politicians, try to convince the tea party faction that they’re pure enough to trust.

Tell people that our taxes have actually been on a steady decline for decades, and they simply won’t believe you, no matter how much evidence you present. Ditto trying to explain that by some measures we’re still spending less on state government than we did before the recession.

I used to think the problem was that everybody these days thinks they’re entitled to their own set of facts. It was only recently that I realized there’s a deeper problem: The actual facts just don’t make any sense to many people’s way of thinking, so they treat the disconnect as cognitive dissonance and throw out the data that don’t comport with their reality.

Consider this analysis from an Upstate anti-government activist, speaking recently to The Greenville News: “Every year our state budget continues to go up, up, up, far exceeding our growth. So we’re getting more government, we’re getting higher taxes.

“They tell us, ‘We cut taxes.’ That’s nonsense. How can you increase spending and cut taxes and yet you claim that we also are not running a deficit? The numbers don’t add up.”

That certainly sounds like a sensible analysis. And there are circumstances under which it could be accurate. If, say, our population were remaining stagnant, or declining. Or if people’s income or purchases remained flat, or declined. But of course none of that is happening.

What’s happening isn’t that complicated. It just isn’t necessarily intuitive.

Consider: Your salary could be cut by 10 percent, but your household income would increase if your spouse got a job.

The number of South Carolinians with jobs has increased tremendously, as our population grew by 15 percent over the past decade, 28 percent over the past two decades.

As a result of all those additional people, the total income that South Carolinians make is going up, and their total amount of spending is going up, so people are paying more total taxes, even as overall tax rates effectively decline because of an unending string of tax cuts. It also means there are more people who use our schools and roads and courts and need police and fire protection and other services.

I’ll pay more in income taxes if my income increases, not because the Legislature raised the tax rate, but because my income increased; I might even pay more if the Legislature cuts the income tax rates. Again. I’ll pay more in sales taxes if I buy more taxable goods, which I’ll probably do if I make more money, even if the Legislature and local government leave the tax rate alone.

There are more ways to calculate and compare taxes than there are Republican efforts in the State House to cut them even more, but here are three pretty standard ones, just to give you an idea of how we stack up:

South Carolina’s tax collections are the lowest in the nation, at $1,476.50 per capita; they dropped 18 percent from 2001 to 2011 — more than they did in 48 states. Our combined state and local tax burden per capita was less than all but one state, at $2,742. Our 2012 Tax Freedom Day — the date when we’ve earned enough money to pay all of our federal, state and local taxes for the year — was earlier than all but three states, at April 3.

This is simply not a state in which we’re “getting higher taxes.”

Ah, but our government is growing, right? Well, if by “growing government,” you mean that the total amount spent on state government each year is generally more than it was the previous year, then yes, it’s growing. With the exception of two years during the recession, state general fund expenditures (the money over which the Legislature has the most control) are growing — although this year’s $6.1 billion general fund budget is still down from the $6.7 billion in 2008-09, just before the recession hit.

But remember: While the general fund grew by 12 percent over the past decade, our state’s population grew by 15 percent. That means the Legislature appropriated less general fund money per resident, even without considering inflation, in 2012 than in 2002.

When you include federal funds and “other” funds, state spending is up 52 percent over that period. But that “other” category is extremely squishy; in addition to real money from sources such as college tuition, hunting licenses, admission to state parks, other user fees and the gas tax, it includes such items as the amount of money state agencies pay the Budget and Control Board for “rent.” Really.

What’s a little surprising is that even with all that federal and other money, the total number of state employees is actually down, from 63,000 in 2002 to 56,000 in 2012. In fact, the total number of state employees has decreased over just about any period you look at during the past two decades, except last year, when it rose slightly from 2011, but remained well below the 2010 level.

So if by “growing government” you mean government is increasing the number of people on the payroll, it’s not.

If you mean government is providing more services, it’s also not. Our state is providing services to more people — Medicaid and food stamps, both funded primarily by the federal government, are prime examples — but it’s not increasing the services to each person.

Consider education spending. The Ways and Means Committee budget for next year increases the main source of money for public schools by $77 million. More than $20 million of that is necessary just to maintain the per-student spending at this year’s level, as the student population increases. The other $57 million will increase the so-called base student cost by $56 per student, to $2,068. That’s still $510 below what it was in 2008, and lower than it was even in 2005.

Think of it this way: If you get a raise each year that’s less than inflation, your income is growing. But that doesn’t mean you can afford to buy a bigger house or a fancier car or eat out more often or in any other way “grow your lifestyle.” And if you have another child, then no matter how much your income may be growing, your money is going to be a lot tighter.

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571.

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