Does S.C. “Live within Its Means”?


Twenty-four billion is a large number. No one has ever seen 24 billion dollars all together, so it’s difficult to imagine an amount of money that large. But apparently, according to South Carolina’s lawmakers, it takes this mind-bending amount of money to run the state for one year.  And strangely enough, each year it takes more money to run the state than the year before, even when inflation is accounted for (about a $1.3 billion increase from last year’s budget).

Without diving deeply into what this money is spent on – a story of government run amuck, with tens of millions spent on lobbyists, private nonprofits, and corporate welfare – you would first have to figure out how the state gets all this money in the first place.

Fortunately, unlike the federal government, the state is constitutionally mandated to maintain a balanced budget, so even though the state has racked up an enormous debt load in recent years, the preponderance of the state budget isn’t borrowed money.  For that reason we hear repeatedly from elected officials that South Carolina government “lives within its means.” Now this “live within its means” line is used all the time by self-proclaimed fiscal conservatives as a message promoting limited government. But what exactly is fiscally conservative about a government collecting a literally unfathomable $24 billion and spending every penny of it?

In any case, the “lives within its means” line misses the  point: Of course state government lives within its means, because its “means” – tax revenue – are practically unlimited. Government’s “means” are whatever it can take in taxes.

Take sales and income taxes. South Carolina has a base state sales tax of 6 percent, while the maximum (with inclusion of local sales taxes) is 9 percent.  The state has a maximum income tax of 7 percent, in which anyone making over $14,000 must pay. These taxing mechanisms, plus additional taxes and federal revenue added up this year to give South Carolina its $24 billion budget, which if divided by its roughly 4.6 million population gives a cost of roughly $5,200 per person.

Now let’s compare this with another state. Texas has roughly the same sales tax as South Carolina, with a 6.25 percent base state sales tax and 8.25 percent max with local sales tax included. Texas has no income tax. Given the omission of this avenue of tax income, Texan taxpayers pay significantly less per citizen at roughly $3,700 ($95 billion, 25.6 million population).

Given these drastic differences in tax mechanisms, let’s see how the two states compare in CNBC’s recent rankings in “America’s Top States for Business 2012”.

Overall: Texas #1, South Carolina #32
Cost of Living: Texas #3, South Carolina #24
Economy:  Texas #5, South Carolina #25
Infrastructure: Texas #1, South Carolina, #21
Education: Texas #26, South Carolina #46

It may not be fair to say that tax structure is the only factor contributing to these differences, but it would be hard to argue that South Carolina’s comparatively harsh tax climate – especially on the poor, who pay the same high rate of sales tax as everyone else – doesn’t have an adverse effect on its business climate and citizens in general.

So Texas achieves a higher standard of living and better services and takes proportionally less money from its citizens. That’s a big generalization, but it’s supported by empirical evidence. Both Texas and South Carolina maintain a balanced budget requirement, so both states’ politicians can claim their state “lives within its means.” The difference is that Texas requires less in “means” from its taxpayers than comparatively poorer South Carolina does.

So never mind whether state government “lives within its means.” Technically, it doesn’t have a choice. The real test is whether it takes too much from its taxpayers to provide basic services, and it’s sufficiently apparent that it does.

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