27 March 2008

Reason #1 to cut (or eliminate) the income tax

The State newspaper this morning reports that South Carolina's per capita income continues to lag behind the rest of the country. This year our growth was 4.2%, a full point behind the national growth of 5.2%. South Carolina now boasts the 4th lowest per capita income in the nation, slipping from 6th worst a year ago. (Yep, another statistic to be proud of.)

I find it interesting (in a strange, crazy sort of way) that The State can report this statistic without bringing up the obvious reason behind the statistic - an income tax rate that ranks among the ten highest in the country. When you tax productivity and success, you lose business - it's really that simple. Yet we get caught up in the property tax debates and sales tax debates, and our legislature never gets around to cutting the one tax that has a direct impact on our ability to create wealth and jobs - the income tax.

Why do we think it is that we have none of the Top 100 companies in America headquartered in South Carolina? If we, for instance, want to become the haven for the energy companies, taking advantage of the Savannah River site's unique potential to generate hydrogen fuel, we have to have a tax structure that companies want to take advantage of. Or do you think Microsoft landing in Washington state was simply by chance? Washington state has no state income tax, preferring instead to rely on other, lower taxes and a robust economy. That's the formula for success.

What's worse, since no income tax cut is coming this year to stimulate our state's economy, we can already look forward to having this report be just as bad (or worse) next year. Hopefully those who are elected this fall will pay more attention next spring when this report resurfaces.

In the meantime, way to go guys, thanks for keeping us down - again.

1 comment:

Silence Dogood said...

Josh, I think this might be a bit of post hoc logic, as there are a lot of reasons S.C. is not as prosperous as it could be - and the correlation you notes is speculative not factual. Furthermore, you noted that S.C. ranked in the top 10 for highest income tax rate. I understood us to be at the 13th highest for individual tax brackets (counting Washington D.C.) do you have a source for this - mind you it could have changed since 2007. Two things to note, a better indicator might be to look at the overall tax burden on all citizen - for instance many cities have additional income tax to the state ones, often times in states with higher economic development such as NY (mind you I don't make the counter argument to your that higher income tax rates make more economic properity because it would be just as spurrious as your argument is).

Lastly, maybe look at the state don't have income tax and consider where they fall on the economic prosperity chart - I'd imagine though it is all over the map. If you can find that info though I would be very curious to give it a look. There are maybe 10 - Florida I know does not, but they can recoup that revenue with huge tourism taxes on hotel and car rentals et cetera. Others that I know of are Wyoming, Washington State, Alaska, N. Hamp (I think), Texas, and South Dakota.