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Senate Finance hears revenue update: growth concentrated, corporate tax spike uncertain
Summary
Frank Rainwater told the Senate Finance Committee that South Carolina is growing in population, employment and income but unevenly across counties; he cautioned that recent corporate income tax gains may not be sustainable and flagged workforce shortages and a shifting tax base.
Frank Rainwater delivered a revenue and economic update to the South Carolina Senate Finance Committee, telling members that the state continues to grow in population, employment and personal income but that benefits are unevenly distributed across counties.
Rainwater said South Carolina’s share of national population, employment and income has trended upward in recent years and that the state ranked among the top states in absolute population gains last year. “South Carolina is growing, but we’re uneven throughout the state,” Rainwater said, citing fast growth in counties such as Horry, Jasper, Lancaster and Berkeley and declines in counties including Bamberg, Hampton and Williamsburg.
The presentation underscored three features likely to matter for tax receipts: the geographic concentration of growth, a rising share of personal income that comes from transfer payments (for example retirement and Social Security), and volatile corporate income tax collections. Rainwater noted long-term wage and personal-income growth but said earnings now account for less of total personal income than in prior decades; transfer payments are a larger share of income, he said, “and a lot of that is tax exempt.”
On employment, Rainwater pointed to the fast recovery after the pandemic and to a tightening labor market: he said there are now fewer than one unemployed worker for each job opening in both South Carolina and nationally, a condition he said will make it harder for government and private employers to fill positions. “There’s gonna be a struggle ... it’s gonna be harder for government to compete with private industry,” he said.
Rainwater flagged corporate income tax as the most uncertain revenue category. He told the committee that corporate collections more than doubled during the pandemic years — rising from levels around the roughly half‑billion‑dollar range to over $1.2 billion — and that more recently collections have reached about $1.4 billion on a rolling fiscal‑year basis. “We’re nervous about banking on that in your estimate,” he said, adding that much of the final corporate tax tallies arrive late in the fiscal year when businesses file returns.
Committee members asked Rainwater whether the state has detailed data about the age and employment status of migrants; Rainwater said IRS migration data show North Carolina is the largest source of in‑migrants and that the staff can follow up with more information about ages and employment status.
Rainwater closed with a reminder about budget parameters: for the fiscal year under consideration he told members the committee had about $666 million in new recurring funds and roughly $1.25 billion in nonrecurring funds available to allocate, and he cautioned that recent post‑pandemic revenue boosts are likely to moderate.
The committee did not take action on policy during the presentation. Rainwater said staff would provide follow‑up material on migration, age cohorts and county‑level drivers of growth.
