Is South Carolina affordable for business?

· by Herb Dew

Herb is the CEO of HTI. He founded HTI in 1999 along with John Knight and David Sewell, and remains heavily involved in the organization today.
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I was just reading through a 2013 report from the Anderson Economic Group that intrigued me.  Anderson analyzed state taxes paid versus the amount of pre-tax operating margin earned by companies operating in the state. This essentially allows you to assess accurately the amount of taxes paid versus the amount of spendable income available to PAY the taxes by state. Many studies just look at total taxes paid but don’t do a “per capita” assessment to see how the states compare. So a state like NY pays WAY more in state taxes than, say, a state like Montana.

A few years ago I began to wonder how “affordable” South Carolina was as I began to do business in other states and saw that our comparative tax costs were lower. In our industry, both SUTA and Workers Compensation are a very large part of our payroll burden. We also face property, city/municipal taxes, as well as other costs.

So, without further explanation, here is how Anderson reports (based on actual numbers) states are ranked. The % is the percentage tax burden relative to the operating margins of companies. So the higher the percentage, the WORSE the tax cost of doing business in that state.

Delaware was lowest. Businesses there only spend 5.1% of operating margin on state taxes. Alaska is the highest. They spend 25.2%! Georgia is ranked the 5th lowest at 7.8%. North Carolina is 8th lowest at 8.1%.

South Carolina is ranked #43 at 12.8%. Guess who is at #42? New York at 12.4%.

In South Carolina, businesses face high employment taxes as well as high property taxes. We also have above average sales tax and city/municipal taxes.

I am concerned about this as we in South Carolina continue to try to compete with our neighbors. Of our Southern neighbors, only Florida is a higher business tax state than SC.

We need to stay competitive.