South Carolina’s small business owners and second property owners are subsidizing the taxpayer-funded bailouts of large corporations to an alarming, unprecedented degree – one of several fundamental inequities that exists in the Palmetto State’s complex, discombobulated tax code.
The rampant anti-competitiveness, inefficiency and unfairness of South Carolina’s revenue generation methodology is laid bare in a presentation made to state lawmakers last month. A copy of that presentation – prepared by S.C. Chief Economist Frank A. Rainwater – was obtained exclusively by FITS.
For example, businesses and rental property owners are projected to be on the hook for a whopping $3 billion (or 47 percent) of the state’s $6.2 billion property tax burden in FY 2012-13, according to Rainwater’s calculations. Seven years ago, this same group was responsible for less than a third of the state’s property tax collections.
This pronounced (and growing) shift is being fueled by two things – a dramatic ramp-up in taxpayer-funded economic development efforts and the insatiable appetite of our worst-in-the-nation public school system for more tax dollars.
According to the S.C. Board of Economic Advisors (BEA) the state’s investment in “targeted tax credits” has soared from $34 million annually in 1998 to more than $1 billion a year today.
Meanwhile, according to a recent report from our friends over at The Voice, local school districts have been raising taxes on businesses and second homes in an effort to recoup “lost revenue” from a 2006 “tax swap.” The only problem? South Carolina taxpayers have already been reimbursing these districts for their “lost revenue” via higher sales taxes – which makes this nothing but a shameless revenue grab.
Bottom line? We’re all paying the price as state-level politicians continue picking winners and losers in the marketplace and local-level politicians continue to produce the world’s worst system of public education.
“Anybody out there still want 170 politicians in charge of our economy instead of the free market?” S.C. Sen. Tom Davis (R- Beaufort) asked on his Facebook page.
Don’t expect anything to change anytime soon, either. S.C. Gov. Nikki Haley – who proposed a ridiculously inconsequential corporate tax-grocery tax swap during her 2010 campaign – continues to tinker around the edges of the problem. Meanwhile state legislative leaders like House Speaker Bobby Harrell remain content to “study” the problem.
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. And while none of them are getting big government incentive deals – like the $900 million package shelled out to lure Boeing – they’re certainly paying for them.
The documents we obtained not only expose this inequity, they also expose the fact that our state exempts more sales tax revenue – an estimated $2.7 billion – than it collects.
Also, the documents show that general fund revenue projections for the coming fiscal year – once thought to be so rosy – aren’t looking so hot all of a suddent. In fact, Rainwater is currently projecting a 1.1 percent decline in general fund revenues for the coming fiscal year – which Haley and state lawmakers will no doubt attempt to compensate for by raising fees and fines on South Carolina taxpayers.
In fact Haley’s Department of Natural Resources board is already seeking to raise fines and fees on South Carolina hunters, fishers and boaters. In the state’s current record-setting budget, these fines and fees (a.k.a. “other funds”) constitute more than $8 billion of the $22.1 billion total – the second-largest source of revenue.
To view the revenue documents we were provided with, click on the thumbnails below – and remember to enlarge an image even further, just click on it a second time.
(Click to enlarge)
To view the documents in .pdf format, click on the links below …
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