WHERE’S THE RELIEF?
Research has consistently shown that one of the keys to economic growth is the reduction or elimination of the individual income tax. More than any other levy, this tax is directly correlated with job growth, income growth and real economic development (as opposed to the top-down “economic development” bailouts taxpayers are forced to subsidize).
Why is the income tax so inexorably linked to the health of our economy? Because it is paid by job creators (small businesses) and consumers alike … impacting both production and consumption.
South Carolina currently assesses a 7 percent marginal income tax rate on all income above $14,250 – one of the highest, most regressive rates in America. For years this website has been calling for the gradual phase out of this tax – which we’ve proposed to “pay for” with specific cuts in government (not to mention the economic growth generated by such a phaseout).
Unfortunately big spending “Republicans” in the S.C. General Assembly have rejected any proposal to substantively reduce the individual income tax – while S.C. Gov. Nikki Haley has offered up a mere pittance of income tax relief.
This year the debate over income tax relief has done something we didn’t think was possible – it’s taken a step backward.
In her FY 2013-14 budget, Haley has proposed eliminating the state’s six percent income tax bracket on income between $11,400 and $14,250 and taxing that income at a 5 percent rate instead. The result would save the average filer $29 in 2014 – or much less than already puny $80-100 in income tax relief she proposed in her FY 2012-13 budget.
We’re not opposed to either reduction – although as we said a year ago, infinitesimally small cuts like this aren’t going to do anything to stimulate our state’s economy.
There’s also a catch. Haley’s proposed “tax relief” isn’t actually included in her budget – it’s in her supplemental funding “wish list.” In other words it wouldn’t even happen unless the state’s revenue situation improves over the coming months.
That’s another step backward on this issue for Haley …
South Carolina needs broad-based income tax relief, not more tinkering around the edges of our anti-competitive tax code. Unfortunately Haley is proposing a ridiculously small tax cut – and putting it at the bottom of her priority list.