REPORT: Achieving Prosperity, Stability, & Fairness – Essential South Carolina Tax Reforms

INTRODUCTION

Palmetto Promise Institute has produced two major reports assessing the competitiveness and fairness of the South Carolina tax code (2014; 2019). The latter had a powerful title— Funding the Future: A South Carolina Proposal to Ensure Fiscal Stability and Statewide Economic Growth. Those reports, crafted by Dr. Rebecca Gunnlaugsson, are unique in that they are based on models developed with actual tax data and therefore are robust enough to make predictions about the effect of the various reform options presented. Other trusted organizations, including the Tax Foundation and the Lincoln Institute of Land Policy have also produced comprehensive analyses. This brief is intended to glean commonalities from those and a half dozen more in-depth analyses. For a deeper understanding, we commend the original reports to you.

We have chosen to analyze state fiscal policy on the revenue side in three distinct sections. First, we rate the accuracy of various attempts to grade the business climate of the Palmetto State. Next, we examine recent changes to federal tax policy and the consequences of conforming or non-conforming to the current Internal Revenue Code (IRC). The most recent significant change to federal tax policy was in the Tax Cuts and Jobs Act (2017). Finally, we assess the fairness and competitiveness of the major types of taxes imposed by state government. The types of taxes that are most significant are common to all states that use them: sales, income, and property. The latter two have both an individual (personal) and a business (commercial, manufacturing) component.