Tax break for the 1 percent?
Bill would only benefit the wealthy
By Bill Davis, senior editorMAY 4, 2012 -- On Tuesday, the full Senate Finance Committee will have its second chance to debate a House-passed bill that would give venture capitalists around the state a huge tax credit on in-state investments.
Work on the Bill Wylie Entrepreneurship Act of 2011 (H. 3779
) began in earnest in 2010 as a way to keep the state’s “angel” investors investing at home, and to increase new business and jobs growth.
The bill, mimicking similar efforts in neighboring states, would give a dollar-for-dollar tax credit of 35 percent of investments into start-up companies to individuals making over $200,000 a year. Households pulling down a combined $300,000 annually would also be able to receive the tax credit, as would some businesses.
Supporters of the bill point out that the lofty financial requirements for being a qualified investor to get the big guarantee is a federal Securities Exchange Commission requirement. Critics point out that no one was required to bring the bill to the floor in the first place.
That tax credit could be spread out over several years, potentially wiping out a person’s or a household’s or a pass-through company’s state tax bill.
But what about citizens making $199,999.99 a year or less? Or a household bringing in $299,999.99 annually? No tax credit, according to the bill’s primary author, Rep. Joan Brady (R-Columbia).
Wylie, who represented the Greenville area, passed away in 2010, and Brady has continued the fight to get the bill, named in honor of her fallen colleague, passed.
Brady this week said that the bill was needed to keep investor capitol within the state so South Carolina could compete with Georgia, which has Atlanta as a huge business incubator, and the Research Triangle in North Carolina.
Brady also said she hoped that by keeping more South Carolina money in South Carolina start-ups, the entrepreneurs and their “ingenuity” wouldn’t leave for the greener pastures of other states.
House Minority Leader Harry Ott (R-St. Matthews) said the bill was another example of “the state’s Republican Party taking care of rich people, and if anything is left over, then it might go for the rest of the people.
“It’s been that way since the time the Republican Party was created in this state and that hasn’t changed today,” said Ott.
Sen. Phil Leventis (D-Sumter), who sits on the Finance Committee, said that the number of households and individuals making that kind of money represented “less than 1 percent of the state.”
“That’s 40,000 people, or about 1,000 thousand people per county who make that much,” said Leventis. “Sumter’s got a few, but nowhere near the 1,000, and I’m sure no one in Lee County makes that kind of money.”
Leventis, who said he was going to look closely into the bill before it comes up next week, wondered why people who did make that kind of money needed that kind of “incentive” to invest.
Brady has heard the criticism that the bill is only for the rich, but said that venture capitalism is a self-selecting field. “A guy making $50,000 a year isn’t likely to want to take the risk with whatever he’s saved up on a start-up company,” she said.
Sen. Mike Fair (R-Greenville), who sat on the Finance subcommittee that passed Brady’s bill to the full committee with a favorable recommendation, said the reason for the push was simple: “Jobs, jobs, jobs.”
But Fair said that he worried about this bill being perceived as government becoming too involved in the free market.
Crystal ball: Is the bill a handout to the rich, or much-needed tinder for start-up companies blazing a new path? How about both? While the SEC requirements do give Republicans some political cover, it doesn’t absolve them from having backed a bill that only takes care of the wealthy instead of the entire state. If a solution for the SEC requirement can’t be found, look for this one to die -- and resurface in 2013.
Bill Davis is editor of Statehouse Report. He can be reached at: email@example.com.
Gotta make the doughnutsWhile the House plugs away on the floor cleaning up a host of smaller bills, like one protecting funding for the Heritage Golf Tournament, the Senate will be a bit more frenzied as work is completed on that chamber’s budget plan for the upcoming fiscal year.
And while the Senate Finance Committee has received and produced a series of proposed provisos – special one-year funding bills that supersede state law required spending – it hasn’t discussed how its dollar allocations are different from the House plan.
The week of May 14 will be “budget week” on the floor of the Senate, and whether senators report on Monday or Tuesday of that week will be determined by how much of the dollar allocation issues are handled this upcoming week. Also on the calendar:
- House Judiciary. The full committee will meet Tuesday at 2:30 p.m. in 516 Blatt to discuss an abortion bill, among others. Agenda.
- Senate Judiciary. The full committee will meet Tuesday at 3 p.m. in 308 Gressette to discuss a long list of recommended bills that would allow more stores to sell guns, define limits for safe police pursuits, and allow candidates for state primaries who were recently left off due to not filing financial forms correctly to appear on primary ballots. Agenda.
- House LCI. A subcommittee will meet in Blatt 403 on Tuesday upon adjournment of the full LCI Committee to discuss a federal health care reform response bill, among others. Agenda.
- House LCI. The full committee will meet again on Wednesday at 11 a.m. in 403 Blatt to discuss a host of bills, including one that would further govern when citizens could no longer receive unemployment benefits. Agenda.
- Senate Judiciary. A subcommittee will meet Wednesday at 11 a.m. in 307 Gressette to discuss bills allowing voters to cast their ballots via the Internet, and require those appearing before a state committee to be sworn in before giving testimony and face criminal charges and fines if they are found to have been speaking in contempt of the committee. Agenda.
Retirement debate drags onWith the Senate coming to the floor soon with its own plan to revamp the state retirement system (see below), the legislature is getting close to dealing substantively with a pension fund that is reportedly grossly underfunded.
But will the question of how to pay for the shortfall – through increased employee contributions, increased years of work, or by decreased future payouts – may still be too big to be completed by the end of this legislative session. Especially with incumbents itching to get out on the campaign trail and not anger state employees (read: voters).
Retirement reform on tapA Senate subcommittee this week passed a plan that would revamp how the state’s retirement system is structured. The House passed its own version last month.
There are some substantial differences between the two. The House plan is, in short, for those enrolled in the state retirement system – which includes teachers and cops – to pay in more to the system and wait longer to receive benefits. The Senate plan calls for beneficiaries to work more years, thus paying longer into the system. The Senate plan also allows for a 1-percent cost of living adjustment capped at $500 a year.
The House plan did not include a cost-of-living adjustment, or “COLA,” and there was much complaining in that chamber of how unfunded COLAs, combined with lackluster retirement fund investments during the recession, have helped increase the system being as much as $17 billion underfunded.
The Finance Committee in the Senate will take up the plan in the coming week, and it could be part of the budget debate the following week, when that document hits the Senate floor.
Haley exonerated, but star nicked?
The state House Ethics Committee ruled this week that Gov. Nikki Haley did not illegally lobby on behalf of an employer while a member of the House of Representatives. The 5-to-1 vote along party lines cleared Haley of the accusation of lobbying for a hospital and a lobbying firm, but may not have removed the taint completely.
The day before, the entire House voted to change rules so that hearings for charges against House members could be, in certain circumstances, made open to the public. The next day, the committee found there was probable cause that Haley had violated ethics laws and made the hearing open to the public. But lickety-split, it then voted there was no proof that then-Rep. Haley had done anything wrong.
Some observers have groused that the committee was more interested in protecting representatives' ability to earn money as "consultants" than they were in fully prosecuting Haley. Haley's camp issued a statement, pointing out that, rightfully, Haley had once again been proved to be doing her job in accordance with all state laws.
It should also be noted that the numerous complaints filed and allegations made against Haley have all been dispatched and are beginning to stack up like rotting firewood. That being said, her political career may be suffering a punishment of a thousand lashes, albeit from wet noodles, that could stall her star from rising further. She's been accused of marriage infidelity, working as a lobbyist while serving in public office, understating her salary as a consultant for a hospital, claiming to be white on her voting card, and so on. Whether she's done anything wrong in her life at all may no longer be the issue. Her future elections (read: veep) may revolve around voters being able to distinguish between smoke and fire.
SC is case study on how not to run an election
By Andy Brack, editor and publisherMAY 4, 2012 -- Just as South Carolina wipes away one pie that hit it in the face, another sails in and lands with a big splat on the state’s reputation.
One day after hearing oral arguments on a case of whether more than 100 people didn’t properly file disclosure paperwork when they signed up to be candidates, the S.C. Supreme Court Wednesday ruled they couldn’t appear on the ballots.
The Legislature reeled as complicated election calculus in House and Senate elections got turned on its head. Both major political parties got caught with their pants down for being slack in nurturing candidates on the proper way to file. And voters sighed, again embarrassed by a state that can’t keep from doing dumb things.
The flimsy silver lining? For every one candidate who was knocked off the ballot, two or three or more filed correctly. That shows the process isn’t necessarily broken. Lots of candidates -- particularly where local party officials seemed to understand how to file properly -- did it right. But in places like Lexington and Richland counties, where more than 50 candidates’ viability seems doomed, more training is obviously needed on the right way to file for an election.
Meanwhile, a practical solution is in the offing, but there may not be enough time to implement. A measure surfaced in the Senate Thursday to reopen the filing period for later this month, which would give candidates knocked off ballots the opportunity to properly refile a “Statement of Economic Interest” -- a required document that outlines their business dealings so any conflicts are transparent.
Unfortunately, whenever lawmakers change an election law in South Carolina, the proposals have to be “pre-cleared” by the U.S. Justice Department because of the state’s past penchant for disenfranchising voters. State Sen. Larry Martin, the Pickens County Republican who chairs the Senate Judiciary Committee, said Thursday he was worried the Obama Administration would take the full 60 days it was allowed to review the proposed change, which would be too long for candidates seeking to get back on the June 12 primary ballot.
“It’s a really thorny thicket we find ourselves in,” Martin said. “If this were mid-March, we might have a shot at it, but we’re approaching mid-May with a June 12 primary.”
Few people, other than egg-on-face state Democratic and Republican party officials, seem to contest the high court’s ruling -- that state law actually says economic disclosure statements must be filed “simultaneously” with statements that candidates want to be on the ballot. What’s caused the problem is that the disclosure form no longer can be filed as a paper form. Instead, candidates must file that online with the State Ethics Commission.
So, proper filers bring a receipt or a printed version of the online disclosure form with them when they file to be candidates. But this year -- apparently because of training problems -- many candidates either ignored the process and didn’t file disclosures or were told they could do it later. What the Court did was rule that they couldn’t ignore the law and had to do the process correctly.
While the Legislature might not be able to produce a quick fix this year, it really needs to go back to the election law books and make sure that all references to filing forms in paper are updated to include electronic filings. And political parties, which undergo a lot of turnover between elections, need to make sure that they’re providing the correct advice to county parties and other officials involved in the filing process.
Better yet: Why not get political parties completely out of the candidate filing process and update state law so candidates file with people who deal with elections day in and day out: the county election commissions?
The worst thing about this whole embarrassing mess is that a lot of good people who wanted to challenge incumbents will probably not be able to run. During a time when people are increasingly frustrated with incumbents and government, what’s going on with South Carolina elections is fueling even more disgust. And that’s not good for the process ... or freedom.
Andy Brack is publisher of Statehouse Report. You can reach Brack at: firstname.lastname@example.org.
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Is S.C. broke or morally bankrupt?
By Brett Bursey
Special to Statehouse Report
MAY 4, 2012 -- A new proposal by state Sen. Phil Leventis, D-Sumter, would eliminate or reduce many sales tax exemptions that go to special interests and drain needed revenue from state coffers.
“Our state’s not broke,” Leventis said at a May 1 press conference, “but we are teetering on the verge of moral bankruptcy in our failure to meet the needs of our citizens.”
Unlike the recommendation by the Republican-sponsored Tax Realignment Commission (TRAC) that called for using new revenue to further lower taxes, Leventis’ bill would use new revenue to fund statutory obligations for education and local governments. The legislation would increase the state’s budget by nearly $1 billion next year.
Leventis noted that during his 32 years as a state senator, “I have been guided by the principle that government should invest in meeting the needs and aspirations of its citizens. This principle has been undermined by an ideology claiming that government is the cause of our problems, and accordingly, must be starved. A government unwilling to invest tax dollars in itself and its citizens is the real source of our problems. When businesses strive to be competitive, they do so by investing in their future. That is what we have to do today in South Carolina to insure a more prosperous future.”
At the S.C. Progressive Network, we know the state isn’t broke, but that narrow political ideology has trumped statesmanship. The lack of political will to fairly reform our tax codes to meet our basic civic contracts for education and infrastructure leads our citizens to believe that “minimally adequate” is the best we can hope for.
We don’t expect the legislature to pass the Leventis bill this year, but it’s critical for the public to understand that a lot of money is being left on the table. It should be up to the taxpayers to decide if their money is best spent on education or on further reducing taxes to compete with Mexico.
Of all the industrialized nations, only Chile and Mexico have a lower individual tax burden than the United States, according to the Organization for Economic Cooperation and Development. Among the 50 states, South Carolina is ranked 43rd in the nation in taxes as a percentage of income, and dead last in per-capita state taxes, according to the National Tax Foundation.
“We’re all better off, when we’re all better off,” said Network co-chair Virginia Sanders, citing a recent International Monetary Fund report on the correlation between income inequality and general prosperity.
Our state’s business-friendly climate is reflected in the Forbes ranking that puts South Carolina 5th in its “business friendly regulatory environment” but 44th in quality of life. Forbes ranks the quality of our labor supply at 22nd, far behind North Carolina (third) and Georgia (fourth).
“The message this sends is that South Carolina, with its lax regulations and unskilled labor force, is a cheap place to do business — but you might not want to live here,” Leventis said.
The S.C. House budget cuts mandatory funding for education by $665 million and local government funds by $71 million. These spending levels are set by law, but EFA and local government funding obligations are ignored by budget provisos due to a presumed lack of revenue and lack of political will. These cuts means larger classes, fewer teachers, police and firefighters, as well as deteriorating infrastructure, all of which combine to make our state less competitive.
The TRAC recommendations on sales taxes would raise nearly $1 billion next year and more in coming years. This is close to what we need to meet these mandatory spending levels, and more comprehensive tax reforms would meet and exceed them for years to come.
“The critical debate I hope to spark,” Leventis said, “is whether the role of our government is shaped by the special-interest groups who make the majority of campaign contributions, or by the citizens who pay the taxes. I believe that citizens are willing to pay fair and equitable taxes when they get their money’s worth. It’s called democracy.”
In this year’s House budget:
- The statutory funding level for the Education Finance Act was cut by $665 million, keeping our per-pupil funding at 1998 levels.
- The statutory funding for local governments’ support of police, fire and public services was cut $71 million.
- The revenue from the extra penny of sales tax for Act 388 was $129.5 million short of what was needed for education funding through sales tax, rather than property tax, requiring another raid on the General Fund.
The House budget shorted mandatory funding of these core public services by nearly $736 million. If you add the $129.5 million shifted from the General Fund, you come up with just about what the TRAC recommendations could recover through broad and fair sales tax reforms.
The TRAC Recommendations Act (S. 1454) would:
- Raise the $300 “max tax” on cars, boats and planes and raise $61 to $143 million annually as increased caps kick in.
- Tax food (not purchased with food stamps) at an effective rate of 2.41%, raising $251 million next year. 18.2% of the state's population is receiving SNAP benefits and would pay no tax on food.
- Tax non-Medicaid/Medicare medicine (with a $100 cap) and home utilities at an effective rate of 1.25%, raising $124 million next year. Those on Medicare or Medicaid (44% of the state’s children) will pay no tax on medicine.
Bursey is director of the SC Progressive Network, a coalition of organizations that represents the interest of a majority of the state’s families who make less than $42,000 a year and see no benefit in continuing to cut core public services.
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From business and environment to filing and recyclingBusiness. CEOs across the nation ranked South Carolina as the 7th best state in which to do business. More.
Environment. The General Assembly voted to continue the state Conservation Bank, protecting the state’s green and wet bits, with dedicated funding sources. Hurrah! More.
Filing. As many as 100 candidates across the state will probably not be listed on primary ballots because of not filing financial statements on time, according to a state Supreme Court ruling this week. Some are blaming the electronic filing system, while others apparently depended on advice from state parties. Oops. On the plus side, the Court moved quickly (for a change, compared to a four-year wait on an important school funding case) which was refreshing. More.
Restructuring. Now there is a second plan to do away with the state Budget and Control Board in the House -- to go along with another plan from the Senate that calls for the creation of the Department of Administration. Hurry up, guys (and ladies in the House). More.
Recycling. A House Ag subcommittee voted this week not to require state bars and restaurants to recycle their considerable output of empties. Earth to legislators: Not too smart. More.