South Carolina collected higher tax revenue than expected this past year, but officials are concerned about where they came up short.
The South Carolina Board of Economic Advisors said the state collected $16 million less in corporate income taxes than expected. BEA Chairman Chad Walldorf said he was concerned businesses are making less money since April, “They’re not likely to be hiring more people,” he told SCRN, “They might even go the opposite direction and start laying off people.”
“That sort of tends to be a precursor to what’s going to happen to individuals’ wallets and pocketbooks.” Walldorf and other board members also worried about the traditional lag between declining corporate income and a rise in unemployment.”
Overall, tax revenue is up from last year, including an additional net surplus of $127 million in personal income and sales tax revenue (see BEA revenue report). Which begs the question: what will the state do with it?
“Any additional revenue dollars that fall should either go to pay back debt or should go back to the people that paid it,” Governor Nikki Haley told reporters Wednesday, “And that’s in the pockets of taxpayers.”
Legislators in June passed a budget that includes an additional $56 million in surplus going towards education. The remainder went towards unemployment tax relief for businesses.
“What we need to do is not just think we can go out and spend with this extra money,” Haley said, “It means that we need to go and make sure that we don’t get back in the situation that we were before this last legislative session.” In 2009 and 2010, lawmakers covered budget holes of more than $800 million with stimulus funds.
The board is also keeping its revenue estimate ($6.0 billion) in place for the current fiscal year, despite bringing in nearly $6.1 billion this past year. While that would be a one percent decrease, it is important to note the original projection was first made in November– before a mini economic spurt in the first quarter of 2011 beat the BEA’s two-year expectations.
South Carolina was showing signs of recovering earlier this year. However, the Federal Reserve has since labeled the state as one of 13 that have likely fallen back into “recessionary territory.”
“Going forward, I think there’s a lot of uncertainty,” Walldorf said, “We’re cautiously hopeful things will go in the right direction, but it remains to be seen.”