Landess: Low spending, low taxes? Don’t be fooled

By ASHLEY LANDESS

Legislative leaders are busy spinning their new budget as “fiscally conservative.” Taxpayers shouldn’t be fooled. What’s really true? At around $22 billion, this year’s budget is the largest in state history. Spending grew by almost $1 billion. Lawmakers funded much of state government with hidden taxes through fees. More than a third of state government is paid for with federal dollars that come with heavy mandates and costs for S.C. taxpayers.

This year’s budget isn’t fiscally conservative by any definition outside the State House. However they spin it, lawmakers are spending more on state government than ever while our state’s unemployment rate is among the nation’s highest and our per capita income among the lowest.

To add insult to injury, House Speaker Bobby Harrell claimed our state has “the lowest state taxes in the nation.” Anyone with a basic understanding of our taxes knows that can’t be right. We don’t have close to the lowest individual income tax in the country; only 14 states have a higher individual income tax rate than South Carolina. We also have the 15th highest sales tax in the nation, and the very highest manufacturing property tax.

How, then, did some legislative leaders conclude that our state taxes are the nation’s lowest? They clearly misunderstood the data they cite. A chart by the Tax Foundation does show South Carolina with the lowest per capita tax collections in 2009, but does not show that we have the lowest state taxes. There is a difference between tax collections and tax rates. The state collected fewer dollars, but that simply means fewer people paid taxes, and that many who did were low-income earners. That speaks more to the inequity of our tax code than anything else.

Taxpayers are not all equal in South Carolina. For example, South Carolina exempts more sales tax and corporate income tax than it collects; tax collections may be low, but that doesn’t mean those who are paying are necessarily charged low rates. In reality, many low-income earners are taxed at the same rate as high-income earners. Clearly the state isn’t collecting much in taxes from workers who barely earn above the poverty level, but who still pay 7 percent of their income in taxes while multi-billion dollar companies get a pass.

It’s bad enough for politicians to claim higher spending is “good news,” and then mislead us by saying our taxes are the lowest in the nation, but they also assert that anyone challenging their spin wants to “tear us down as a state.” In other words, politicians lecture us on the power of positive thinking because they don’t like being questioned about their poor choices on our behalf.

There is no greater obstacle to getting where we want to be than the delusion that we are already there. If South Carolinians want to have the lowest taxes in the nation and a true fiscally conservative state budget, then citizens must demand that politicians actually deliver both rather than pretend they already have.

It is absolutely possible to turn around our state’s economy. In fact, in the 1980s our state’s economy was the 15th fastest-growing in the nation. Unfortunately, by the 2000s it was the 12th slowest-growing, and that drop correlates with increased government spending. To become a prosperous state again, the public must be realistic about where we are, and optimistic about what’s possible.

Hope for prosperity doesn’t rest in Columbia, but with South Carolinians who are ready to set high goals for this state and to insist that our leaders do the same. If we want our state to be the best place to live in the nation — and no one should tell us that’s an unrealistic goal — then we’ll have to insist that our elected officials stop trying to make us feel good about where we are today. The status quo is not good enough for most South Carolinians. It should be unacceptable to anyone serving in our government.

Ms. Landess is president of the S.C. Policy Council, a non-profit public policy research organization in Columbia. For more information, go to scpolicycouncil.com.