Time for reality check on state spending

South Carolina's version of Chicken Little runs around screaming: "We're being taxed out of house and home! The government is growing out of control! It's going to swallow us whole!"

This fantastic version of reality is repeated ad nauseam until it begins to feel real. Real enough that those calls for spending caps and tax caps start to sound almost reasonable.

But they're not reasonable, because this is not reality, at least not by any reasonable measurement.

You can waste years of your life trying to figure out how the peddlers of this propaganda manage to manufacture their numbers; eventually, you'll discover the tricks they used or the flaws they simply overlooked in painting such a distorted version of the truth. Or you can wait for the annual state tax burden report from a group that has been putting out respectable numbers for decades. The Washington-based Tax Foundation is unabashedly about lower taxes, but its numbers are objective in the sense that it doesn't care how South Carolina matches up against the rest of the nation.

And how South Carolina matches up, according to the report issued earlier this month, is pretty much the same as it has for years:

We pay less per capita in state and local taxes than most of the country.

We pay less as a percentage of our income than most of the country.

And our taxes are not spiraling out of control. To the contrary, both the percentage of our income and the total dollars we pay in state and local taxes are projected to decrease this year.

The report combines state and local taxes to avoid the distorted comparisons that you get in state-only calculations because of the differences in state vs. local responsibilities from state to state. It projects that South Carolinians will pay an average of $1,079 in state and local taxes this year, which is $6 less than last year. That's not $6 less when adjusted for inflation; that's $6 less in real dollars. And it's not lower because we're making less; our per capita income is projected to increase by $904, to $35,419 (still nearly $9,000 below the national average).

What that means is that the percentage of our income we pay in state and local taxes will decrease to 8.8 percent. That's less than what people in 36 other states will pay, and it's tied with 2002 as the lowest it's been in our state since the Tax Foundation started calculating these things back in 1997. The national average is 9.7 percent.

As the Tax Foundation explained, the percentage of income paid in state and local taxes is down across the country this year "primarily because income grew faster than tax collections between 2007 and 2008." (You can read the full report, reports showing that our property taxes were modest even before they were cut and that our sales tax is high and lots of other things at www.taxfoundation.org.)

Of course, the fact that we're paying less in taxes doesn't automatically disprove the claim that our government is growing faster than incomes; although there should be, there is not a perfect correlation between tax collections and government spending. And there is a problem when spending increases faster than revenue. But that problem doesn't call for spending caps, which limit growth even when there's plenty of tax revenue available. It calls for budgetary discipline. Lacking that, our state constitution makes it impossible for spending to outpace revenue for long.

Unfortunately, there's no single comparison that will give you a realistic look at how states stack up when it comes to taxation and government spending.

Spending comparisons are the most problematic, because spending is difficult to measure, every government calculates it differently, and the same money is often counted twice.

Taxes paid are tougher to manipulate, but that doesn't mean they're entirely straightforward.

Taxes paid per capita can reflect differences in income and wealth as much as in tax rates. (If every state charged a flat 8 percent income tax, and nothing else, states with higher average incomes would collect more money per capita.)

Taxes paid as a percent of income can be skewed when a state has a particularly high or low portion of retirees, or of businesses. (Taxes might look artificially low in a state with a lot of people who are living off of savings rather than income.)

And just to make things more complicated -- although probably more realistic -- the Tax Foundation focused this year on how much people pay to their own state vs. how much they pay to other states. The numbers are surprising. The report says that South Carolinians will pay an average of $2,048 in taxes in South Carolina and another $1,079 in taxes to other states.

Much of the money we contribute to other states is paid indirectly, in the form of higher product costs that the report attributes to corporate taxes that manufacturers pay in their home states. By comparison, the amount we collect from non-South Carolinians adds up to an average of $1,085 for every South Carolinian.

That suggests we're not doing as good a job as we'd like to think soaking up tax dollars from all the tourists who travel to and through our state. But while that's a topic worth more exploration, it's far away from my main point, which is this:

The sky is not falling. Taxes, however, are.