We all have death and taxes in common. But how much South Carolinians pay in taxes divides them.
A special House committee is aiming to bring equity to the state’s tax system, not to raise new revenue.
As the committee sorts it out, legislators are scraping together solutions to budget woes.
Atop lawmakers’ list for the coming legislative session, which begins in January, are reducing a $21 billion unfunded liability in the State Retirement System and finding a permanent funding stream for roads.
The Transportation Department says it needs at least $1 billion annually to bring the state’s 41,000 miles of roads up to par. Next year, House and Senate leaders plan to seek a permanent funding stream for roads, likely in the form of a gas tax increase.
Meanwhile, the committee is mulling nixing the state’s more than 70 exemptions—including exemptions on fuel—as a starting point for an equitable, stable state budgeting process.
So, who is paying taxes in South Carolina? And who isn’t?
At least 2.2 million returns are filed annually. Eighty-one percent of those returns are on household incomes under $50,000.
Forty-two percent of returns have no tax liability, while 21 percent of returns account for 80 percent of income taxes.
Many returns with no tax liability cover significant incomes because of the exemptions offered in South Carolina.
A family of four, earning $50,000 annually, may have a taxable income as low as $21,800 after deductions and exemptions. Similar household incomes in neighboring states have significantly higher taxable incomes–$33,600 in Georgia and $35,000 in North Carolina.
Forty percent of wage earners were in the top marginal income tax bracket of seven percent in fiscal year 2015.
The state taxes 35 percent of everything consumers spend. Exemptions on fuel, prescription drugs and unprepared food account for 53 percent—or $1.6 billion—of exemptions.
Households pay 63 percent of the sales taxes collected, followed by 29 percent collected from businesses. The remaining burden is shared by visitors and government.
The lowest 10 percent of wage earners spend a higher percentage of their incomes on sales tax—more than 10 percent. But the highest 10 percent of wage earners spend less than three percent of their incomes on sales taxes, even though they outspend the poorest consumers.
The sales tax is six percent, but counties may impose a one-cent local option sales tax to fund local projects.
State income by source
Income and sales tax accounted for approximately 85 percent—or $6.6 billion—of the state’s income in fiscal year 2016, which ended in June.
The third largest source of income, corporate income tax brought in $411 million. The state’s corporate income tax rate is five percent. At least six states’ corporate tax rates shrank in 2016, including neighboring North Carolina’s, which fell from five percent to four percent.
Transfer payments are the state’s fastest growing source of income, nodding to an aging population. That category of personal income includes Social Security, student loans, unemployment, retirement and other government funded income or assistance.
State income by county
Fifty-three percent of personal income comes from seven counties—Greenville, Charleston, Richland, Lexington, Spartanburg, Horry and York.
Where does all this money go?
Lawmakers appropriated 55 percent of the $7.5 billion General Fund budget in fiscal year 2017 to two agencies, the state Education Department and Health and Human Services.
Personal income accounts for a smaller percentage of revenues in the General Fund budget today—four percent, compared to 6.8 percent in 1980.