South Carolina`s Tax System
SouthCarolina’s Tax System
SouthCarolina’s Tax System
Atax refers to the financial levy charged on a taxpaying individual orlegal establishment by an administrative unit for the purposes ofrevenue collection. Every nation or administrative unit within astate has a tax system, which is used to tax people and companies onthe revenues that they earn. The collected taxes are used to developthe states and the welfare of the residents of those states. Thereare different types of tax systems in the world and differentcountries adopt varying systems (Self, 1996). In the US, Federal lawson taxation regulate the taxation system but the taxation takes placeat the state and local government levels. The purpose of this essayis to assess the nature of the taxation system in South Carolina inrelation to the principles of taxation and other associated maxims.
Atax system must be perceived to be fair in how it taxes individualsof different abilities and designations as well as legal entities. Assuch, the tax system should be based on the ability of taxpayer topay rather than fixed on the needs of taxing authority (Self, 1996).South Carolina’s tax system is fair for all individuals and firmsunder its taxation jurisdiction and it offers some of the lowest taxrates in the US and the world in general. The tax structure focuseson the ability of the taxpayer to effectively pay their due withoutany added difficulties or huge dents in their financial resources.The country’s income tax is divided into six brackets with thelowest group in the brackets abstaining from paying income tax. Thelowest percentage is 3% for people earning between $2851 and $5700,while the highest pay bracket pays a taxation rate of 7% for peopleearning over $14251. This reflects equality in the amount each groupis taxed as every subsequent is taxed higher with an increase in itspay bracket. In addition, people within the same pay bracket have thesame tax rate, which indicates fairness in the system (TaxFoundation, 2014).
Salestax in the state has risen over the years from 5% to 6% of which 1%is optional in certain counties within the state. This rate of salestax is among the highest in the US and it does not reflect fairnessas some people are exempted from the tax while the additional 1% isnot applied to all residents of the state. There is a maximum tax of$300 on items such as vehicles, boats and trailers, which are stilltaxed at the rate of 5%. Many as unfair perceive the sales tax but itremains easily computable even by the taxpayers themselves. Inaddition, this tax is easily collectible as all returns are filed on15 April of every year (Tax Foundation, 2014). The property tax inthe state is collected by local authorities at a rate of 4% forprimary residences while privately owned property for agriculturaluse is taxed at 4% of its use value. Personal property is taxed atarea of 10.5% of the depreciated value of the income tax. Some taxexemptions are available for property owners over the age of 65 forthe initial $50000. This tax presents many challenges in terms ofcomputation due to the complexity and many inclusions in thedetermination of the amount due for taxation. Vehicles are taxedalongside property with the rate of registering a vehicle dividedinto different terms (Tax Foundation, 2014).
Thesystem as a whole reflects fairness as it involves reduced ratescompared to other states in the country on many of the taxes. Inaddition, the tax system gives the taxpayer a chance to compute theirown taxes beforehand and have effective means of collection. One taxthat benefits the state’s economy more than the others is the salestax due to the huge revenues generated through the high tax rate. Theothers may be seen as harming the economy of the economy but theirlow rates are meant to attract more investors to the state, which initself is a progressive move for the economy.
Thetax system in South Carolina is largely progressive meaning that thetax rate in the tax structure increases with a significant increasein the taxable base. This normally assumes a pattern of low to highfor all beings that are subject of the taxation system. However,different types of tax are based on different principle, which areaimed at reflecting the flexibility of the system. The income taxconsisting of six brackets is testament to the principle ofprogressiveness with the sales tax being fixed in almost all thecounties in the state (. The gap within which the income tax ratevaries reflects fairness as there is no excessive gap between any tworanges. The system as said before is based on the ability of taxpayerto pay depending on their pay bracket. The property tax is fixed ondifferent categories of properties with options for tax reliefs forpeople who own schools and those who have advanced in age. Even withthe tax rate being fixed at 4%, the higher the value of the property,the higher the tax an individual pays on it, which reflectsprogressiveness in effect. This structure of the property tax is fairas it is fixed on a certain percentage on which every individual andfirm is taxed. The sales tax is also progressive in that it taxesindividuals on a fixed rate of 5% (+1%) for all levels of saleswhich sees high scale sales being taxed more while lesser sales aretaxed at the significant equivalent of the tax charge.
Thefederal laws on income tax regulate the structure of the income taxin South Carolina and South Carolina has options for adjustments,deductions and exemptions on income taxes. In the calculation of theincome tax, the state does not charge any tax on capital gains forproperty sold in the state and others. However, the state may deducta certain percentage of the net gains on capital that an individualholds for two years or more. The tax structure also allowsindividuals to take deductions on retirement income from as much as$3000 per year in the first year of up to $10000 after they reach theage of 65 years. Deductions on income tax are also allowed for peoplewith children below six years, children in need of special care.Additionally, the computation does not put into account the benefitsof social security as they non-taxable in South Carolina. Corporateincome tax is charged at a flat rate of 5% (Tax Foundation, 2014).
Propertytax is divided into different categories in the state, with eachcategory having its own tax rate. The state divides property intoprimary residential property, private agricultural property, personalproperty that includes items such as vehicles, motorcycles,airplanes, boats and others. For residential property, the tax rateof 4% applies to the financial value of the property as well as up toan area of five acres that surround the property. Primary residencesare exempted from tax for the first fair $100000 on operation costsof schools. This allows property owners to save on property taxesespecially in counties where the exemptions are given. The exemptionson property tax, however, do not apply to secondary homes andproperties. For people aged 65 and older and with an establishedresidency of one year or more, they are exempted from residentialdwelling tax for a sum of up to $20000. For vehicle property,taxation is done depending on the millage with additionalregistration fees applying after every two years (Tax Foundation,2014).
Thesales tax in the state is compounded together with the use, and motorfuel taxes. With the sales tax taking a fixed rate of 5% (+1%) invarious states, sales taxes amounting to 5% are applied on purchasesoriginating from outside of the state and this may include internet,catalogs, and other tangible purchases. For those who have alreadypaid the sales tax in the other state of purchase, the state slapsthem with a use tax after the production of the sales receipt showingthe amount of tax paid. In filing for individual income returns,residents of South Carolina can effectively report their use taxtogether with the income returns. In addition, the state’sdepartment of revenue collection and taxation charges 16 cents forevery gallon of diesel fuel or gasoline used by motorists. Thischarge is included in the price of the products at the respectiveselling stations (Tax Foundation, 2014).
Thestate of South Carolina does not charge any tax on estates left tothe spouses of a deceased person. However, it follows set regulationsand rules by the federal government in taxing other estates.
Taxesare collected by administration units to form revenue bases forvarious development projects as well as for the maintenance of thestate’s activities. In the case of South Carolina, different typesof taxes are collected by different collection authorities and fordifferent purposes and uses. School districts, cities and countieswithin the state impose property taxes. Local governments in generalcollect more taxes on properties in the state and are mainly used tosustain operations in the schools run by local governments. Salestaxes are usually collected for the purposes of road and bridgeconstructions and repairs, development of new schools and other highscale projects within the administration unit that imposes the tax(Ulbrich, 1997). In addition, taxes on the sale of certain productssuch as tobacco and alcohol is incorporated in the medical insurancefund (Medicaid) for the state which generally takes care of medicalcover for the residents of South Carolina state.
Theincome tax levied on working individuals in the state is used to fundthe operation budget of the state, which generally covers thesalaries of state employees, expenditure within the state organs aswell as development of the state affairs. Other taxes collected bythe state are used together with revenue collected from incomereturns to develop the various sectors of the economy of the state ofSouth Carolina. These sectors may include transportation,communication, technology and infrastructural development. Inaddition, the state and the respective county and local governmentshave to take of the state’s sanitation, water and electricitysupply. The state is also responsible for the health of the itscitizens and as such, relies on the income and sales taxes to fundall the hospitals in the state as well as providing medication andother basic healthcare essentials (Ulbrich, 1997).
Inthe face of uncertain economic future throughout the world, it isimportant for administrative units to have well established andstable structures that will support its activities in case of anyeventualities. With the tax system carrying the most importance inthe collection of revenues in a state, it is important to evaluateits capability to support South Carolina in relation to the stabilityof revenue sources as well. South Carolina mainly relies on income,sales and property taxes for its revenues. As such, its revenue basecan be considered stable, as even with economic variations thesesources will remain. The only thing that might change is the size ofthe revenue due to inflationary pressure, which may lower or raisethe amount of taxes the state collects. However, the system face hugerisks due to the excessive exemptions granted to various parties,which may significantly account for an increased potion of therevenue base if they were collected. Generally, the tax system andstructure in South Carolina reflects fairness, equality as it iswithin agreeable limits of taxation, and it allows the people toadvance themselves financially while at the same time benefittingwell from the revenues collected.
Self,J. K. (1996). Taxsystem efficiency measure based on Adam Smith`s maxims of taxation.London: MacGaw.
TaxFoundation (2014) South Carolina. TaxFoundation.Retrieved May 1, 2014, fromhttp://taxfoundation.org/state-tax-climate/south-carolina
Ulbrich,H. H. (1997). Thefiscal sustainability of the South Carolina revenue and expenditureClemsonUniversity.