(The Center Square) – South Carolina ranks as the 31st-best state in tax environment for businesses, according to the Tax Foundation’s 2022 State Business Climate Tax Index.
The state was helped most by its fifth-best ranking in corporate taxes but ranked low in individual taxes (33rd), sales taxes (31st), property taxes (36th) and unemployment insurance taxes (27th).
"The (Tax Foundation) index is, quite frankly, cold water in the face whenever it comes out,” said Oran Smith, senior fellow at the Palmetto Promise Institute. “But we think the ground up at the Statehouse is shifting.
“North Carolina cutting their corporate tax to 0% and their personal rate to 3.99% has been a huge wakeup call up there. With us at 7% and North Carolina at 3.99%, it is hard to maintain that the 'effective' or 'actual' rate is the same in each Carolina. That will no longer compute. Two tax cut bills introduced in the [South Carolina] Senate that looked 'symbolic' in November are looking quite real in January."
The bills – S. 924 and S. 925 – introduced Dec. 7. The first was dubbed the "South Carolina Job Creation and Competitiveness Act of 2022" and would make the state income tax 3.5% of the difference between federal taxable income and the state standard deduction.
The second is dubbed the "South Carolina Tax Policy Modernization Act" and relates to sales, income and property taxes. It states "tax policy changes must be implemented comprehensively, simultaneously, and expeditiously to promote current and future economic growth, including private sector capital investment and job creation; to correct tax burden disparities and favoritism toward special interest groups; and to promote significantly lower taxes on a broader base."
The Tax Foundation is a nonprofit tax policy group that has operated since 1937.
Its annual index is aimed at assessing how each state structures its total tax system and provides policies for improving that structure.
The index ranks states in five major tax categories and provides an overall ranking.
Wyoming, South Dakota, Alaska, Florida and Montana led the Tax Foundation’s rankings while New Jersey, New York, California and Connecticut were the lowest ranking states.
South Carolina announced in early November that it would be lowering or maintaining the current unemployment tax rate for all businesses in the state.
South Carolina lawmakers decided to use federal COVID-19 relief funds to keep the fund intact. The trust fund had a $1.1 billion balance heading into the pandemic and a $1.19 billion balance at the start of November.
The fund was drawn down to $350 million at one point, but $500 million in federal relief funds was sent to the fund to help businesses avoid seeing a significant increase in unemployment taxes.
“While other states had to take out millions of dollars in loans to cover the cost of unemployment, South Carolina took a fiscally responsible approach that is now paying dividends in lower taxes for our businesses and zero debt to repay,” Gov. Henry McMaster said when the unemployment tax rates for 2022 were announced.