S.C. Gov. Nikki Haley’s 2010 campaign was a profound disappointment for those of us who believe South Carolina’s anti-competitive tax code is choking off our state’s primary economic engines – small businesses and the consumers that support them.
As a candidate, Haley proposed a ridiculously inconsequential corporate tax-grocery tax swap – a plan that most analysts agreed would have actually resulted in a small tax hike. Haley claimed her plan would have eliminated the state’s “small business income tax,” but in reality no such tax exists.
Of the roughly 70,000 full-time employers currently doing business in South Carolina, 97.5 percent of them are small businesses. There are also more than 100,000 full-time self-employed South Carolinians. Obviously, most of these companies and individual income earners file individual returns, not corporate returns.
Accordingly, if Haley really wanted to cut the “small business income tax,” she would have proposed lowering the state’s top marginal individual income tax rate.
Instead, Haley proposed eliminating the state’s five percent corporate income tax – which comprises a mere $150 million out of a state budget of $22.1 billion (the definition of a drop in the bucket). Meanwhile, any “relief” provided by this reduction would have been more than eaten up by Haley’s re-imposition of the sales tax on groceries.
Fortunately, Haley abandoned her brain-dead proposal as soon as she took office. Unfortunately? She’s proposed nothing to take its place.
Until now …
On Sunday, The (Columbia, S.C.) State newspaper published an exclusive report outlining Haley’s latest thinking on “tax reform.”
“We have six tax brackets,” Haley told The (Columbia, S.C.) State newspaper. “We’re going to simplify it down. We’re probably going to go down to about three tax brackets. You should not have to have a rocket scientist to do your taxes. It should be simple.”
Wait … what?
Here’s a news flash for Haley – it is simple. Anyone making minimum wage in South Carolina (i.e. $15,000 a year) is already paying the state’s top marginal rate of 7 percent.
Take a look …
Income Range/ SC Tax Bracket
$0 – $2,739 = no state income tax
$2,740 – $5,479 = 3 percent
$5,480 – $8,219 = 4 percent
$8,220 – $10,959 = 5 percent
$10,960 – $13,699 = 6 percent
$13,700 and higher = 7 percent
Seriously … whether you’re flipping burgers or flipping properties, you’re paying the state’s top marginal rate. For Haley to claim that our state’s income tax brackets need to be simplified is one of the most nonsensical things we’ve ever heard a politician in this state say – and that’s saying something.
In addition to offering this ridiculous “reform in name only,” Haley also appears to be scaling back her already less-than-ambitious campaign agenda. Rather than eliminating the corporate income tax, Haley now tells The State that she wants to phase it out over time.
That’s a step backward in our book …
To her credit, Haley is proposing a reduction in the state’s 10.5 percent manufacturing tax – but again, most major employers don’t have to pay that levy due to the huge taxpayer-funded incentive packages they receive from the state.
“When you see the Boeings and the Bridgestones come in, the reason they’re not complaining about 10.5 (percent) is they’re getting incentives to not have to pay it,” Haley told The State. “But the small Mom and Pops that don’t have that many employees, those are the one we need to be helping.”
We agree … in fact, that’s what we’ve been saying for years.
But how many “Mom and Pops” in the state pay a 10.5 percent manufacturing property tax? Not that many. Wouldn’t Haley help thousands more “Mom and Pops” by reducing their income tax burden?
Don’t get us wrong … we’re all for phasing out the corporate income tax and reducing the manufacturing property tax, but to pretend that these reforms will do anything to lower the tax burden for the overwhelming majority of “Mom and Pops” is just plain disingenuous.