September 14, 2006
No matter how you crunch the numbers, S.C. isn’t a high-tax state
"But when you look at the total amount of money that South Carolinians pay to run state and local government, no matter how you do the calculations, one fact stands out: South Carolina is not a high-tax state.
Don’t take my word for it. That’s what the economists at USC and Clemson say. It’s what the anti-tax Tax Foundation says. It’s what pretty much any national ranking says.
The Tax Foundation is the 80-year-old anti-tax group in Washington that calculates how many days Americans have to work to pay all their taxes. Its primary calculation is “tax burden,” which it defines as the percentage of income paid in taxes. In 2006, South Carolinians paid 10.2 percent of their income in state and local taxes. That ranked 30th nationally, which was the highestour state has ranked since 1990. Over that 16-year period, our combined state and local tax burden has ranged from a low of 9.6 percent to a high of 10.3 percent. (When you add in federal taxes, our tax burden rises to 29.2 percent, which ranks 38th nationally and puts our “Tax Freedom Day” for this year on April 17.)
The great thing about the Tax Foundation’s number is that, unlike most legitimate comparisons, it’s up to date. That’s because it uses projections instead of actual tax numbers for local taxes, which the Census Bureau can’t compile in real time. Any comparison that looks only at state taxes is worthless, because, as the Tax Foundation notes, “some states accomplish at the local level what other states accomplish at the state level.”
But there’s a major drawback to this nifty real-time comparison: It counts only taxes. That’s particularly problematic in South Carolina, because we rely much too heavily on fees. We get 29.6 percent of our revenue from what the Tax Foundation calls “non-tax charges and miscellaneous,” compared to the national average of 24 percent.
As the Palmetto Institute reported last fall, in a series of studies it commissioned economists to write on South Carolina’s tax system, that over-reliance on fees moves our state much higher on some measures of tax burden."