Collection cost
Although the recession hit the American states hard, the economic graph of the state of South Carolina exhibits progression due to a number of factors. One of these factors is the collection cost of the state. Here, the tax returns are the core source of economic growth in the state. The analysis of various metropolitan areas in the state is a direct indication of growth over the past decade. The state of South Carolina has many revenue sources but the main sources of income for the tax come from the individual income tax and sales tax.
The “individual income tax applies to households and to incorporated businesses, privately owned by individuals in the state.”[1] With only 3 % of the states working population being unemployed, the collection cost obtained from real income is a key source of state revenues. Apparently, by 2010, 46.6% of the state revenues were obtained from income tax. This amounted to $2.9 billion in annual income tax revenues for the state. With the mounts of income tax being that high, the collection costs and tax administration costs incurred by the state are equally high. Of the IRS financial budget, 7% of the tax collection costs amount from South Carolina and North Carolina alone. Collection costs incurred are high as they are collected on a monthly basis, where a deduction is done from one’s paycheck.
The state also earns a sizeable amount of its income from business and corporate tax. According to Caraviello, “Although banks are exempted from the corporation tax, they pay 4.5% on their net income to the state. This also applies to savings and loans companies where they pay 6% on their net income while insurance companies pay 6% tax on their premiums.”[2] Corporate tax constitutes the largest part of business taxes. From employment, it contributes to income tax, and amounts to over $400 million dollars in the overall amount of the SC tax income. The collection cost of corporate tax is minimal as majority of the corporations file their own tax reports with the assistance of an accountant and a company lawyer. Corporate tax is collected annually and thus limits the expenditure on collecting it.
In property tax, different locations within the state are charged different tax rates. Metropolitan areas appropriate a large amount of property tax for the state than any other area. The various tax rates also vary depending on the type of property. According to the Homeowners Guide to Property Taxes, a report released by the SC Department of Revenue, 4% of one’s income is charged on their legal residence), 6% for a second home, 4% to privately owned agricultural property, 6% on corporate owned agricultural property. Railroads, airlines, pipelines, manufacturing property, utility real and personal property each incur a 10.5% tax rate.[3] Property tax is collected on an annual basis, as an aim to cut down on collection costs. As such, the collection cost of property tax is not as high as it is for income tax.
Retail sales tax is also another source of income for the state. Revenue from sales tax is determined by personal income of the people of South Carolina. The more they earn, the more they spend on goods therefore the rise in sales tax. Selective sales tax is also a big contributor in the revenue of South Carolina. The average retail sale tax rate of the state of SC was documented to be 5% of the total cost of the product from as early as 1980s. This is also part of the total state retail sales tax rate, which edges at 7% per product. The total retail tax on the entire product is thus a comprehensive 12% of the total cost of the chattel or product in question. The nontax income of the state, according to the SC CAFR, amounts to $ 23,870,891, which originates from the alternative investments made by the state local government. [4]
Tax system concerns
There have been various tax concerns that have been cited over the time, about the South Carolina tax system. Apparently, most of the grievances have been addressed through tax reforms and amendments but evidently, a few issues still stand out. One such issue is the Act 388 of the SC tax requirements, which stipulates an imposition of taxes even on property used for schooling purposes. This is one of the most controversial clauses of the tax system, and has encountered a number of amendments such as the 2006 amendment, but still stands out. Taxation imposed on schools is at time, irrelevant as most schools are public schools, which impose no school fees on the students. Another major issue that has been cited with the SC tax system is the increased property tax, which imposes taxes even on property that generates no income.
These issues are some of the most prevalent issues in the American tax systems of various states and thus it is evident that such they need to be addressed at a federal level, before being addressed in the state tax system.[5]
Bibliography
Boyd, Donald. Selected Issues in South Carolina’s Tax and Education System. April 23, 2008, Print. 16th October, 2012. < http://www.palmettoinstitute.org/client_resources/publications/report%20-%20selected%20tax%20%20ed%20issues%20april%2023%2008.pdf>
Caraviello, Stefanie. 2009. “THEN & NOW: 30 Years of South Carolina Business.” South Carolina Business 30, no. 6: 44
(N.a.) Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2011. Columbia, SC: Pension Trust Funds of the State of South Carolina, 2011. Print.
[1] Caraviello, Stefanie. 2009. “THEN & NOW: 30 Years of South Carolina Business.” South Carolina Business 30, no. 6: 44
[2] Ibid 43
[3] N.a. Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2011. Columbia, SC: Pension Trust Funds of the State of South Carolina, 2011. Print.
[4] Ibid 45
[5] Boyd, Donald. Selected Issues in South Carolina’s Tax and Education System. April 23, 2008, Print. 16th October, 2012. < http://www.palmettoinstitute.org/client_resources/publications/report%20-%20selected%20tax%20%20ed%20issues%20april%2023%2008.pdf>
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