PERHAPS OWING to it not being an election year, tax-cut fever seems to be abating at the State House.
Just 8 percent of the bills that legislators prefiled in advance of Tuesday’s opening of the 2013 General Assembly propose to cut taxes. Two Republicans even put forward plans that could increase taxes, although Sen. Greg Gregory’s bill would merely allow counties to impose a local gas tax, by referendum, and Rep. Kit Spires’ proposal to start taxing groceries again is a repeat.
And when House Republicans unveiled their agenda for the year, “Real Tax Reform” (by which they mean “real tax cuts, with maybe a couple of real reform measures thrown in for good measure”) was relegated to the fifth item on a list of seven, and introduced almost apologetically: “We knew tax reform would be a multi-year effort.”
But this is South Carolina, and as the caucus’ agenda reminds us, whenever two or more Republican legislators are gathered, there is talk of cutting taxes. For that matter, Democrats are happy to join in the orgy, although they tend to gravitate toward targeted exemptions, whereas Republicans like both loopholes and broad-based tax cuts.
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So as lawmakers get back to work this week, it’s worth taking a moment to review the latest “Monday Map” from the Tax Foundation, the Washington think tank that provides more comprehensive and consistently reliable data to compare state and local taxes than any other group I’ve come across.
Actually, people arguing for tax cuts in South Carolina would do well to review just about any of the Tax Foundation’s publications or, better still, a lot of them. Although the foundation has a clear agenda — cutting taxes — when it comes to saying which state comes closest to achieving that agenda, it doesn’t have a dog in the fight. And with very few exceptions, South Carolina ranks as one of its gold-star students.
The most recent entry in its “Monday Map” series (which apparently took the holidays off, explaining why the one that a tax-policy analyst sent me last week is from Dec. 17) looks at how state tax collections per capita have changed over the past decade. Contrary to the impression you’d get if you paid much attention to GOP talking points, only 21 states collected more taxes per person in 2011 than they did in 2001. That’s not tax collections adjusted for inflation; that’s real dollars. (You can find all the maps at taxfoundation.org/maps.)
South Carolina is not among the 21. South Carolina is among the 29 states where people paid less in state taxes in 2011 than they did in 2001.
In fact, South Carolina’s per capita tax collections dropped 18 percent — more than they did in 48 states. Only Georgia saw a steeper drop off, collecting 25 percent less per resident in 2011 than in 2001. (The tax analyst who passed the link on to me worried — only half-joking — that some legislators would use the data to argue that we need to cut taxes even more so we can “make sure we ‘beat’ Georgia in more than football.”)
Now, the fact that a state that ranks 49th in increased tax collections — or, more accurately in our case, second in decreased tax collections — doesn’t necessarily mean its taxes are among the lowest in the nation. A state that started out with the highest taxes could have the steepest decline and still have some of the highest taxes. A state also could leave high tax rates high and still have the steepest decline if its residents got precipitously poorer, and thus had less income and wealth and spending to be taxed.
But we aren’t and never have been and never will be among the nation’s highest-taxed states. We’ve been among the lowest-taxed. So when our tax collections fall faster than those in 48 other states, it either means we’re getting poorer faster or cutting taxes faster than the other states. Or both. As we are.
Personal income in South Carolina has fallen from 41st among the states in 2001 to 48th in 2011, according to the federal Bureau of Economic Analysis.
Meantime, the Tax Foundation’s most recent compilation of comparisons shows that our state tax collections per capita were the lowest in the nation, at $1,475.50.
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.
The amount of revenue our state collected per capita — which includes not just taxes but also fees, fines and federal funds — was 37th highest, which means 13th lowest, at $4,663 37. Our combined state and local revenue per capita was 34th highest, or 16th lowest.
One reason our per capita revenue is so much higher than our per capita tax collections is that we are a poor state, and receive much more federal money than other states. Another reason is that we rely far too heavily on fees to run our government.
We also rely far too heavily on the sales tax, which at 6 percent is 16th highest in the nation, and kept unnecessarily high because we exempt twice as many products and services as we tax. Slash that exemption list, and we could slash the sales tax rate, collect the same amount of money and have a more stable tax base and a more business-friendly tax policy.
But of course what our legislators keep doing instead is creating new sales tax exemptions. And income tax exemptions. And property tax exemptions. In fact, they had already dreamed up 29 ways to do that before they even managed to get to Columbia this week to start the new legislative session.
Ms. Scoppe can be reached at email@example.com or at (803) 771-8571.