HOUSE Speaker Bobby Harrell sent out a news release last week bragging about the latest report to document how low S.C. taxes are.
It’s one of Mr. Harrell’s favorite hobbies, and I always greet these pronouncements with a mixture of bemusement and appreciation. Bemusement because it’s part of the delicate balancing act he is constantly performing, as he seeks to get credit for himself and the House Republican Caucus for being big tax cutters while trying to make the case that our state desperately needs … tax cuts. Appreciation because it’s always nice to see someone bringing context to that debate.
The latest report, from the anti-tax Tax Foundation in Washington, shows that state spending in South Carolina grew by just 16.8 percent from 2001 through 2011. That’s an average of 1.68 percent per year, which is substantially below either the rate of population growth or the rate of inflation, let alone the two combined, which is the conservative gold-standard for the maximum amount spending should increase. Only West Virginia and Alaska had smaller increases.
“If you believe more of your paycheck should be going into your bank account instead of going to grow government, then South Carolina is the state for you,” Mr. Harrell said. “When other states were raising taxes to deal with budget shortfalls, South Carolina’s fiscally conservative majority stood strong to keep taxes low and to cut spending.”
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He called the latest report, released last month, part of “the growing trend showing South Carolina as a national leader in conservative fiscal policy.” Among other anti-tax bragging points Mr. Harrell cited are:
• The nation’s lowest tax collections per capita.
• Nearly $30 billion in tax cuts since 1995, which he calls “a substantial amount of sustained tax cuts considering our state’s average General Fund Budget is below $7 billion a year.”
• A state government workforce that has shrunk by 10,000 positions since 1994.
• The 10th highest portion of state spending set aside in a rainy-day fund, up from 17th lowest in 2007, before the Legislature required higher set-asides.
If you think of tax policy as a continuum, at one extreme is raising taxes at every opportunity, whether you need to or not. At the other extreme is cutting them at every opportunity, whether you can afford to or not. In the center is neither raising nor lowering taxes. South Carolina is about as far out as you can get on the always-cut extreme. And this is not new.
I moved to South Carolina in 1987, a few months after the Legislature raised the gas tax by 3 cents per gallon. The state didn’t raise taxes again until 2006, and then only as part of a swap that reduced taxes even more, increasing the sales tax by a penny in order to eliminate homeowner property taxes for school operations.
Lawmakers have increased some fees and raised court fines over that period, and in 2010 they increased the unemployment-insurance assessments on businesses that they had slashed in the 1990s. They also increased the cigarette tax from 7 cents to 57 cents per pack, which still leaves it ninth-lowest in the nation (the gas tax is fourth-lowest) and isn’t legally considered a general tax increase because (thankfully) it reaches less than half the population.
Meantime, as Mr. Harrell is good to remind us, the Legislature cut taxes and cut taxes and cut taxes. Among many, many other things, lawmakers eliminated the sales tax on groceries, indexed income taxes to inflation, eliminated the bottom income tax bracket, reduced the top income tax rate for most small businesses and handed out more sales tax exemptions than you can count.
According to the state Board of Economic Advisors, the tax cuts enacted just since 1991 were worth $2.3 billion in 2009. The tax increases over that same period totaled either $665 million or $815 million, depending on whether you count the unemployment-insurance increase that the Legislature offset. That’s a net tax cut of at least $1.5 billion per year.
Of course, there are costs to cutting taxes, cutting the workforce and increasing the size of reserve accounts while the population continues to grow. By failing even to keep up with population growth, we get those lousy roads that this year’s $141 million diversion of tax funds won’t do much to fix. We get larger classrooms and huge backlogs in the courts and higher college tuitions. And the list goes on. But that’s a topic for another day. So too are the Legislature’s monumentally stupid spending decisions, which fortunately constitute a tiny portion of the overall budget.
Today, the message is simple: Despite all the rhetoric about high taxes and runaway spending, the simple fact is that South Carolina has neither, and hasn’t for at least a quarter century. If you don’t believe me, ask the speaker. Please. These are facts that he and his fellow Republicans ought to keep in mind the next time they feel a case of tax-cut fever coming on.
Ms. Scoppe can be reached at email@example.com or at (803) 771-8571. Follow her on Twitter @CindiScoppe.