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South Carolina gets low marks for its business tax structure

Author: Robert Behre

Source: The Post and Courier

October 29, 2014

South Carolina ranks 37th in the country in terms of its tax structure being friendly to business.

The state's biggest problems, according to an annual analysis by the nonprofit, nonpartisan Tax Foundation, are its high individual income tax and its unemployment insurance rates.

The issue of tax reform has been touched on during this year's gubernatorial campaign, but it hasn't played a central role.

Wyoming, South Dakota, and Nevada rank among the nation's best business tax climates, while companies in New Jersey, New York, and California find those states have the worst tax codes in the country, according to the foundation's annual State Business Tax Climate Index.

Southern states that ranked better than South Carolina include Florida (No. 5), Texas (No. 10) and Tennessee (No. 15).

South Carolina's relatively low rank already has caused pain at some businesses. Neil Whitman of Dunhill Staffing in Mount Pleasant said four years ago, his cost per employee on assignment was capped at about $87. "This year, it's over $800," he said.

The increase in unemployment insurance rates hit manufacturers and the hospitality industry hard, he said, "and it's had a gigantic impact on my cost of doing business."

Dunhill, who serves on the board of the S.C. Staffing Association, said the group has been able to lessen some of the damage, but the high rates still reduce his ability to generate profits and give his employees raises.

The 11th version of the Tax Foundation's report measures each state's code by analyzing more than 100 variables in five categories, including corporate, individual income, sales, property, and unemployment insurance taxes.

"States are punished for overly complex, burdensome, and economically harmful tax codes, but are rewarded for transparent and neutral tax codes that do not distort business decisions," the foundation said in a statement. "A state's ranking can rise or fall significantly based not just on its own actions, but on the changes or reforms made by other states."

For instance, North Carolina improved the most during the past year - jumping from No. 44 to No. 16 because it overhauled its tax code. Maine saw a significant drop in its ranking because it increased its sales tax.

The ranks of other southern states include: Virginia (No. 27); Alabama (No. 28); Georgia (No. 36); and Arkansas (No. 39). No Southern state ranked in the bottom 10.

Tax Foundation Economist and Manager of State Projects Scott Drenkard said states are doing their part to make their tax structures better for business, "and it's time that Washington steps up."

Most of the Top 10 states did not have a major tax, such as a corporate tax, an individual income tax, or the sales tax. But Indiana and Utah still ranked high while levying all major taxes -just at low rates with broad bases.

Reach Robert Behre at 937-5771.

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