Strong corporate taxes buoy state’s budget outlook
11/10/2012 12:00 AM
11/09/2012 9:14 PM
Gov. Nikki Haley has $6.8 billion in state money to allocate as she prepares her executive budget for next year, a $190 million increase from last year’s record-breaking budget.
The Board of Economic Advisors unanimously approved the estimate during its monthly meeting Friday. The board predicts how much money the state will have, an estimate that lawmakers use to plan the state’s budget.
The estimate surprised many State House budget writers.
Just a few weeks ago, they had been speculating that a midyear budget cut might be required because of the uncertainty surrounding the “fiscal cliff” – the nickname given to a series of budget cuts and tax increases scheduled to take effect in January. Economists say those cuts and increases, if enacted, could plunge the country into another recession, hurting South Carolina’s tax collections.
But Economic Advisors chairman Chad Walldorf said the board expects lawmakers will resolve the fiscal crisis, avoiding any damaging cuts.
“There’s obviously a lot of political uncertainty out there at the national level,” Walldorf said after the meeting. “But assuming some reasonable resolution to those issues ... I feel good about our estimate.”
The board was buoyed by steady state income and sales tax collections, and surprisingly strong corporate income tax collections. In the state’s last fiscal year, which ended June 30, corporate income taxes were up 17 percent. State economists – wary of that trend continuing – predicted a 10.5 percent decrease in corporate income tax collections for this year. But through October, those tax collections were up 31 percent.
Economists view corporate income tax collections as a key economic indicator. The more businesses pay in income taxes, the more money they are making and, thus, the healthier the economy.
This is not the only estimate the board will make. Usually it makes a second estimate in February, which the S.C. House uses in calculating its budget, and a third estimate in March, which the state Senate uses for its budget.
While $190 million is a lot for most people, it is pennies to the state Legislature. For example, the state Department of Health and Human Services, which administers the Medicaid program, has requested an additional $193.4 million in state money in next year’s budget. Other state agencies also are requesting increases.
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