On Record is a regular feature which lets South Carolina’s policy-makers speak their mind about the issues most important to them. If you’re interested in guest-blogging for On Record, email PPR Editor Logan Smith. Today’s column is from John Ruoff of The Ruoff Group.
Low-income and middle class taxpayers in South Carolina pay a larger share of their income to support our public structures and systems than do our wealthiest taxpayers. The quality of life we all enjoy in South Carolina is directly connected to those public systems and structures. Our schools, hospitals, social services, parks and infrastructure are what make our communities good places to live and work. But according to Who Pays? (4th ed., 2013), released Wednesday by the Washington-based Institute on Taxation & Economic Policy (ITEP), the top five percent of taxpayers, and especially the top one percent, are not carrying their share of ensuring that our communities are good places to live and work.
As this chart from the report shows, all of us contribute through our taxes, but while our poorest families pay 7.1 % of their family income in state and local taxes, our wealthiest citizens pay only 5 %. This disparity has grown from 1.6 % in 2007 to 2.1 % today when comparing ITEP’s 3rd edition of Who Pays? to the 4th.
All of us are taxpayers. As Figure 2 shows, all of us, but especially our lowest income families, pay a significantly higher share of family income in sales taxes (5.1 % for the lowest 20 %) compared to the highest 1 % (.7 %). As we have shifted more of our taxation from the relatively neutral property tax and the more progressive income tax, that increases the overall difference between our worst off and best off families—shifting ever more of the responsibility for our community well-being onto lower-income families. The top 1 % pays a smaller share in income taxes even than others in the top 20 %–3.6 % to 3.8 %.
Part of the favorable income tax treatment of the wealthiest 1 % flows from the favorable treatment South Carolina gives capital gains income—a 44 % discount for capital gains as opposed to income from actual work. We are one of only eight states with such notable capital gains preferences.
The wealthiest also benefit more from federal deduction offsets to federal income tax for state and local taxes, cutting 1.4 % from their overall contribution. The more you make, the more the federal tax code subsidizes your state and local taxes—an upside-down subsidy.
An article in last Friday’s The State suggested that the annual legislation conforming South Carolina’s income tax code to changes in the federal tax code might cost the wealthiest income taxpayers an additional $200. The average taxpayer in the 1 %, making $775,700 a year, would see a whopping increase in share of family income going to support our community of .03 %.
South Carolina’s tax structure is, from a fairness perspective, better than average as Figure 3 shows. In all income categories, South Carolina families pay a smaller portion of their income to support state and local public systems and structures than do the average American family. And our overall tax structure is less tilted against lower income taxpayers.
A recent editorial in The State describes South Carolina policymakers’ “tax-by-tax” fixation—looking at one tax at a time. Many in the House declare “flatter is fairer”— but only when they are talking about income tax rates. Making the income tax flatter only makes the system less flat and less fair.
This report from ITEP, the fourth in this widely-used, highly-respected series, shows how important it is to look at taxes as a system and not just at each of its pieces. Most of the proposals being discussed on personal taxes—to raise the very regressive sales tax by eliminating exemptions or to cut income tax rates—make our tax system less fair.
In South Carolina our wealthiest five percent and, especially, the one percent are not contributing their fair share. That’s troubling when our revenues have in recent years not adequately supported the public systems and structures we have built up over decades to ensure that South Carolina is a good place to work and live. Rather than focusing on tax cuts, we should tell the wealthiest to step up to keep our state functioning well, now and into the future.
If this is the type of data that is used to make decisions, then no wonder we have a 16 trillion dollar deficit. What happen to the day that we didn’t covet what belonged to someone else. We use to be a nation that was happy when people gained financial success. You are also forgetting that the same people that you are crying foul about voted themselves (volutarily) a tax increase in November.
Maybe we should do as the writer of this suggested:
This was written by someone who gets it. It’s their future they are worried about and this is how they feel about the social welfare big government state that they are living in!
PUT ME IN CHARGE . . .
Put me in charge of food stamps. I’d get rid of Lone Star cards; no cash for Ding Dongs or Ho Ho’s, just money for 50-pound bags of rice and beans, blocks of cheese and all the powdered milk you can haul away. If you want steak and frozen pizza, then get a job.
Put me in charge of Medicaid. The first thing I’d do is to get women Norplant birth control implants or tubal ligations. Then, we’ll test recipients for drugs, alcohol, and nicotine. If you want to reproduce or use drugs, alcohol, or smoke, then get a job.
Put me in charge of government housing. Ever live in a military barracks? You will maintain our property in a clean and good state of repair. Your home” will be subject to inspections anytime and possessions will be inventoried. If you want a plasma TV or Xbox 360, then get a job and your own place.
In addition, you will either present a check stub from a job each week or you will report to a “government” job. It may be cleaning the roadways of trash, painting and repairing public housing, whatever we find for you. We will sell your 22 inch rims and low profile tires and your blasting stereo and speakers and put that money toward the “common good..”
Before you write that I’ve violated someone’s rights, realize that all of the above is voluntary. If you want our money, accept our rules. Before you say that this would be “demeaning” and ruin their “self esteem,” consider that it wasn’t that long ago that taking someone else’s money for doing absolutely nothing was demeaning and lowered self esteem.
If we are expected to pay for other people’s mistakes we should at least attempt to make them learn from their bad choices. The current system rewards them for continuing to make bad choices.
AND While you are on Gov’t subsistence, you no longer can VOTE! Yes, that is correct. For you to vote would be a conflict of interest. You will voluntarily remove yourself from voting while you are receiving a Gov’t welfare check. If you want to vote, then get a job!
John
Nonsensical argument. Take any consumer tax and the less affluent pay more. Cigarette taxes are especially discriminatory against the poor. The list goes on…auto excise taxes, etc.
The solution is not more aid for the poor, but cutting govt to stay out of things the state/fed constitutions don’t authorize and the poorer will be better off – yes, ESPECIALLY in education!
Yes, that’s right, let’s get government out of education. And, while we’re at it, let’s get hospitals out of medicine, churches out of religion, and thought out of South Carolinian heads!
Wait…what? Really? You mean we’re already a quarter-way there?
Actually its a third of the way there, but that’s based on calculations using disparity math. If you really want to know how close the reality is of getting the hospitals out of medicine, churches out of religion, and the inability of South Carolinians to think for themselves get your copy of
http://sustainabledevelopment.un.org/content/documents/Agenda21.pdf
John