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ISSUE 11.36
Sep. 07, 2012

RECENT ISSUES:
4/04 | 3/28 | 3/21 | 3/14

Index

News :
Betting the house
Legislative Agenda :
Two meetings on tap
Palmetto Politics :
Governor has leadership opportunity, some say
Commentary :
After 25 years, it’s time to boost gas tax
Spotlight :
AIA South Carolina
My Turn :
President, Congress need to do their duty
Feedback :
Anti-South bias gets old
Scorecard :
Thumbs up on trade mission; down on Harpootlian
Stegelin :
Foot in mouth (again)
Megaphone :
Three-part agenda
Tally Sheet :
Find legislative bills

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NUMBER OF THE WEEK

1

How South Carolina is ranked compared to other states on dangerousness of state roads,  according to a new study. See Andy Brack’s column below for more.

MEGAPHONE

Three-part agenda

“Raise money … Meet friends and raise money.”

-- Gloria Bromell Tinubu, Democratic candidate for South Carolina’s newly-formed 7th Congressional District, on her plans during the Democratic National Convention this past week in Charlotte. Tinubu’s primary victory splintered the state’s Democratic Party, as she was not the organization’s first choice, but she was the voters’ eventual choice. More.

TALLY SHEET

Find legislative bills

This year's legislative session may be over, but you can still find information about bills and new laws online through the links below.

ENCYCLOPEDIA

Indigo

Indigo, a plant that produces a blue dye, was an important part of South Carolina’s eighteenth-century economy. It was grown commercially from 1747 to 1800 and was second only to rice in export value. Carolina indigo was the fifth most valuable commodity exported by Britain’s mainland colonies and was England’s primary source of blue dye in the late-colonial era.

South Carolina experimented with indigo production as early as the 1670s but could not compete with superior dyes produced in the West Indies. Cultivating and processing the plant was complex, and planters found other commodities more reliable and easier to produce. Indigo was reintroduced in the 1740s during King George’s War (1739–1748), which disrupted the established rice trade by inflating insurance and shipping charges and also cut off Britain’s supply of indigo from the French West Indies. In South Carolina, Eliza Lucas Pinckney and Andrew Deveaux experimented with cultivation in the 1730s and 1740s. Pinckney’s husband, Charles, printed articles in the Charleston Gazette promoting indigo. In London colonial agent James Crokatt persuaded Parliament in 1749 to subsidize Carolina indigo production by placing a bounty of six pence per pound on the dye.

In addition to economic motives, indigo production also succeeded because it fit within the existing agricultural economy. The crop could be grown on land not suited for rice and tended by slaves, so planters and farmers already committed to plantation agriculture did not have to reconfigure their land and labor. In 1747, 138,300 pounds of dye, worth 16,803 pounds sterling, was exported to England. The amount and value of indigo exports increased in subsequent years, peaking in 1775 with a total of 1,122,200 pounds, valued at 242,395 pounds sterling. England received almost all Carolina indigo exports, although by the 1760s a small percentage was being shipped to northern colonies.

Carolina indigo was grown in a variety of locations and in a number of ways. In the parishes south of Charleston, most indigo planters grew the weed in combination with rice, as a “second staple.” Planters growing indigo closer to the city were split, with roughly half growing rice and indigo and half growing only indigo. North of Charleston, most planters focused solely on indigo. By the 1760s production expanded from the Lowcountry to the interior. Indigo was especially important in Williamsburg Township, where the soil was ideal and the crop was an important part of the local economy. By the 1770s, some indigo was also produced in Orangeburg and Fredericksburg Townships.

The Revolutionary War disrupted production, although the Continental army used Carolina indigo to dye some of its uniforms. Production appeared to recover after the war, as 907,258 pounds of dye were exported in 1787. But indigo exports declined sharply in the 1790s. No longer part of the British Empire, South Carolina indigo growers lost their bounty and market as England turned to India to supply its indigo demand. Carolina planters soon after turned their attention to cotton, another crop that fit neatly into the plantation economy. Indigo was produced and used locally throughout the nineteenth century, but by 1802 it was no longer listed among Carolina’s exports.

-- Excerpted from the entry by Virginia Jelatis. To read more about this or 2,000 other entries about South Carolina, check out The South Carolina Encyclopedia by USC Press. (Information used by permission.)

PALMETTO PRIORITIES

Palmetto Priorities Statehouse Report encourages state leaders to develop and implement Palmetto Priorities involving several issues to make the state better a better place. Click the link to learn more about our suggestions for bipartisan policy objectives.

Here is a summary of our Palmetto Priorities:

CORRECTIONS: Reduce the prison population by 25 percent by 2020.

EDUCATION: Cut the state's dropout rate in half by 2020.

ELECTIONS: Increase voter registration to 75 percent by 2015.

ENVIRONMENT: Adopt a state energy policy that requires energy producers to generate 20 percent of energy from renewable sources by 2020.

ETHICS: Overhaul state ethics laws.

HEALTH CARE: Ensure affordable and accessible health care.

JOBS: Develop a Cabinet-level post to add, retain 10,000 small business jobs per year.

POLITICS: Have a vigorous two- or multi-party political system of governance.

ROADS: Strengthen all bridges and upgrade state roads by 2015.

SAFETY: Cut the state's violent crime rate by one-third by 2016.

TAX REFORM: Remove outdated special interest sales tax exemptions as part of an overall reform of the state's tax structure to be completed by 2014.

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YOUR COMMENTARY SOUGHT

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News

Betting the house

Homeowners getting sweetheart deal on backs of renters

By Bill Davis, senior editor

SEPT. 7, 2012 -- Looks like state politicians have avoided including a huge pot of money whenever they’ve talked about comprehensive tax reform over the years.

This pot is not something you might normally think about, but it has significance. It’s the income tax deduction for interest on home mortgages.

Right now when people do their taxes, homeowners are able to deduct their mortgage interest payments from their overall income, which results in an adjusted gross income.

Federal income taxes are based on that adjusted income. And because states like South Carolina tie their tax system to the adjusted federal income, homeowners don’t pay state income taxes on income used to pay mortgage interest either.

But what if they did? How much untaxed mortgage interest is out there if the state decided to decouple the mortgage interest deduction from the federal return?

A lot. According to the IRS, the state isn’t taxing mortgage interest deductions worth just under $4.6 billion. (See: http://www.irs.gov/uac/SOI-Tax-Stats---Historic-Table-2)

The disparity has left some wondering whether it’s fair for homeowners to get this hidden state tax break, compared to renters who don’t get any tax break for where they live. As one critic contends, doesn’t this mortgage break just mean that every homeowner in South Carolina with a mortgage really is living in “subsidized housing?”

Odious but necessary

One bill that got a lot attention this past legislative session, though not enough votes to pass, was the Angel Investment Act, which provided a substantial, if not complete, personal income tax credit for South Carolinians investing in state companies.

The criticism, and what may have ultimately doomed the bill for this year, was that only the very wealthy were allowed to invest and receive the income tax credits and further backing from state government.

What about the middle class family which had saved dimes, cut coupons, and amassed some money and entrepreneurial spirit, demanded the critics? Why can’t they take part? For them, it was a matter of fairness.

So, how is it fair for homeowners to receive the largest tax deduction in the state, whilst the Average Joe frying fish at the local Captain D’s pays rent with no tax benefit?

It’s not, according to Sue Berkowitz, an attorney and director for the S.C. Appleseed Legal Justice Center, which advocates on the behalf of the working classes.

“We all live in subsidized housing,” said Berkowitz, who said that many homeowners factor the tax savings into their home purchases to make it more affordable than just renting.

Berkowitz, who admitted to also taking a mortgage interest deduction herself, said that the current situation is an unfair as someone paying the same amount of sales tax on a $5,000 car in South Carolina as someone purchasing an $80,000 car, because auto sales taxes are capped in this state.

The response

State Sen. Thomas Alexander (R-Walhalla), a member of his chamber’s Finance Committee, said the mortgage interest deduction was put in place by the federal government to encourage homeownership and help those trying to attain “that piece of the American dream.”

Homeownership has long been touted as a means to a more stable society, and has been largely accepted as a boon, according to Alexander.

Alexander said that government, whether on the state or federal levels, shouldn’t benefit on interest payments made on homes.

House Rep. Brian White (R-Anderson), the chair of the Ways and Means Committee, said that Berkowitz missed the point about sales tax on cars, in that the property taxes leveled annually on that $80,000 vehicle goes to support local interests.

An answer

State Sen. Larry Grooms (R-Bonneau), a gubernatorial candidate two years ago, said that he’s got the answer: do away with state income tax altogether.

Grooms, sponsor of the S.C. Fair Tax bill, said that by doing away with income taxes and shifting to “consumption” taxes, like sales and excise taxes, it does away with the fairness issue completely, when it comes to discussing the benefit some taxpayers receive from deducting mortgage interest.

“The solution is to increase wealth, not tax the elements that create wealth,” said Grooms, who added he would refile the bill before January.

Grooms agreed with Alexander that any attempt to do away with the mortgage interest deduction has a better chance if it’s tackled first on the federal level.

Crystal ball: According to Burnie Maybank, the state’s former head of the Department of Revenue and primary author of the Taxation Realignment Commission (TRAC) report, home ownership deductions are -- and will probably remain -- “sacred.” If he’s right, and he usually is, then South Carolina still has more than a good day’s work coming up with a tax code with a widened base and lower rates that is fair for all paying in, as well as fair for those receiving services and the benefits of government. Still, the first item on legislators’ agendas, especially during an election year, is to just talk about the problem. And tax reform has to come to mean more in this state than tax cuts.

Bill Davis is editor of Statehouse Report.  He can be reached at:  bill@statehousereport.com.

Legislative Agenda

Two meetings on tap

  • Unemployment. A Senate LCI subcommittee will meet Tuesday at 10 a.m. in 308 Gressette to discuss a state law that bars those fired for cause from receiving state unemployment benefits. Agenda.

  • Environment. A task force comprised of senators and representatives and other officials will convene Wednesday in 105 Gressette at 1:30 p.m. to begin implementation of a new state law that removes private citizens’ the right to sue over environmental spills and accidents. Agenda.

Palmetto Politics

Governor has leadership opportunity, some say

When Gov. Nikki Haley returns from a trade mission to Japan, she  has the opportunity to remake state utility Santee Cooper. A series of investigative stories by The Post and Courier has uncovered what may be major problems at the state utility. According to sources quoted in the series, Santee Cooper may have been providing cheaper power to one of its major industrial customers at a cheaper rate that what has been offered to other customers.

Around Columbia, some are saying Haley will have the opportunity to shake things up considering there are more than a handful of board member positions unfilled, and members who have stayed on past their original appointment. The utility is also facing allegations of nepotism, racism and ongoing coal pollution.

Commentary

After 25 years, it’s time to boost gas tax

By Andy Brack, editor and publisher

SEPT. 7, 2012 -- If you’ve run across a pothole anytime lately, the reason why isn’t surprising: South Carolina doesn’t have enough money to maintain its highways.

Of the approximately 66,000 miles of public highways in South Carolina, almost two thirds -- some 41,429 miles of roads -- are owned and maintained by the state, according to the state Department of Transportation (SCDOT). By comparison, the national average for state road maintenance is 19 percent, versus 63 percent in S.C.    

South Carolina has “the fourth largest state-maintained system in the nation,” said the SCDOT’s Michael Covington. “This takes a load off of local government, but it places a heavy responsibility on state government.”

Bridges along these highways are in a mess too. The state road system has 8,383 bridges of which 1,675 are substandard because of structural or design problems, Covington said. Some 424 bridges had load restrictions, meaning that heavy vehicles can’t use them, and seven bridges are flat-out closed.

Why is all of this happening? Because South Carolina’s network of roads is too big for the money it has to maintain them. And they appear to be getting increasingly worse. A new study says South Carolina’s highways are the most dangerous in the nation, based on an amalgamation of several safety reports that ranked states on drivers who don’t wear seatbelts, traffic deaths and federal funding. 

While the study by CarInsuranceComparison.com might have some flaws in how it gives equal weights to six different rankings done by others, it is indicative of our road problems. The study noted South Carolina was “the only state in our top ten to rank in the bottom half of every single category. It wasn’t even close! South Carolina finished a full 37 points ahead of second-place Florida in total score.”

If we accept our roads have problems, which we can feel when driving, then it’s common sense to turn to thoughts about funding. The root of the problem is the amount South Carolinians pay in gas taxes -- 16.75 cents per gallon, 16 cents of which goes to the DOT for roads. Our neighbors pay a lot more. Georgians pay about 28.6 cents in state gas taxes per gallon; in North Carolina, the rate is 37.8 cents per gallon.

“The average state depends on fuel tax revenues for only 35 percent of state-source highway funding,” Covington said, adding that South Carolina’s highway fund depends 92 percent on funding from the state. 

Many states -- not South Carolina -- index their gas tax to inflation. If South Carolina had done this in 1987 when GOP Gov. Carroll Campbell signed the last tax increase into law, the state would be collecting a little more than 32 cents per gallon today, based on average inflation of 2.9 percent. In terms of real dollars, that means the SCDOT this year would have had about $540 million to spend on maintaining and building roads. That amount of money would resurface an extra 2,200 miles of existing roads!

It’s time for South Carolina legislators to modernize and update the amount of money we’re paying for roads. That’s why the S.C. Chamber of Commerce lists road infrastructure improvements as one of the six main planks of its 2012 Competitiveness Agenda. The Chamber is backing an effort to “support an infrastructure plan that allocates General Fund revenues and surpluses to be dedicated to the Highway Fund, and examine other revenue sources for maintaining existing infrastructure.”

In other words, good roads are integral for a state that wants to remain competitive economically. Without world-class infrastructure, competitiveness will go down. And that means jobs.

Rick Todd, head of the S.C. Trucking Association, said raising the gas tax by 10 cents per gallon would help the state’s road network tremendously with about $350 million more per year for maintenance.

“We don’t need to take a look at it,” he said. We just need to flat out do it. 

“When you look at our sister states, which are at the pump about twice what our rate is on the fuel tax, it really doesn’t make sense. Our fuel tax is ridiculously low.”

So, legislators: The ball is in your court. Pick it up and bounce it around. Don’t keep ignoring it.

Andy Brack is publisher of Statehouse Report.  You can reach Brack at: brack@statehousereport.com.

Spotlight

AIA South Carolina

The public spiritedness of our underwriters allows us to bring Statehouse Report to you at no cost. This week, we shine our spotlight on the South Carolina chapter of the American Institute of Architects. The organization is the voice of the South Carolina architectural profession and the resource for its members in service to society. The association facilitates dialogue and the dissemination of knowledge that inspires and enables architects, policy makers and the public to engage creatively and credibly in promoting a better environment and future for all. Learn more: AIASC.
My Turn

President, Congress need to do their duty

By former U.S. Sen. Fritz Hollings
Special to Statehouse Report

 
SEPT. 7, 2012 -- Listening to Morning Joe recently, one would think that Corporate America was responsible for jobs. Corporate America is responsible for profits. The government is responsible for jobs. 

After World War II, the South was broke with no industry. We Southern governors learned quickly that government was responsible for creating jobs. We didn’t cut taxes or get federal aid for policemen, firemen and teachers to create jobs. We increased taxes, got a AAA credit rating, beefed up education and skills, and industry came running. Today, we have the skills to make Boeing’s Dreamliner and “the ultimate driving machine” for BMW. But the government in Washington has been giving away our textile industry to spread democracy and South Carolina has 9.6 percent unemployment. 

We have heard all the Washington lectures on innovation, skills, productivity, education, etc. In the 1970s and ‘80s, the textile industry was investing $2 billion a year to increase productivity. But the most productive textile industry in the world was offshored to the least productive for foreign policy. I started the Advanced Technology Program in 1989 to develop the innovation backed up in the Bureau of Standards in the Department of Commerce. It worked so well that I got the Competitiveness of the Year Award from industry. But the ATP has been abolished. It’s the President and Congress that are not doing their job.

The business leadership would have us believe that globalization is a new phenomenon. The United States was born in globalization or a trade war – the Boston Tea Party. In the early days, we produced agriculture cheaper than any other country. But the founding fathers rejected David Ricardo’s free trade Doctrine of Comparative Advantage and enacted the Tariff Act of 1787 – two years before the Constitution. This industrial policy of protectionism worked so well that Edmund Morris writes in Theodore Rex that within a hundred years, the Colony “was $25 billion richer” than the Mother Country. As Corporate America builds the economy of China and depletes the economy of the United States, we forget our history.

"The Olympics has just proved that the United States is the most competitive nation in the world. But its government – The President and Congress – refuse to compete in globalization."
China with its controlled capitalism gives Corporate America certainty and protection for its investment. Corporate America rushes to China with its research, innovation, production, jobs – our economy. We’ll be drained dry if this continues. 

We can’t prevent the offshoring but it’s incumbent on the President and Congress to limit the offshoring to maintain a strong economy. This calls for developing and enforcing our industrial policy. Our industrial policy has been embellished over the years with trade laws to make sure the nation can defend itself and the economy can be protected. 

If President Obama would enforce the Defense Production Act of 1950 like President Kennedy, we wouldn’t be begging Russia for helicopters for Afghanistan. If President Obama would levy a 10 percent surcharge on imports like President Nixon in 1971 when our trade deficit was a miniscule of todays, it would create millions of jobs. If President Obama would protect steel, motor vehicles, computers and machine tools like President Reagan in 1984, our unemployment rate would be 5.3 percent rather than 8.3 percent. If Congress would quit whining about China’s devaluing its currency and act, it would create millions of jobs. 

The Olympics has just proved that the United States is the most competitive nation in the world. But its government – The President and Congress – refuse to compete in globalization. Wall Street, the big banks and Corporate America want to keep the China profits flowing. They contribute to the President and Congress to do nothing and the President and Congress do nothing. 

The President and Congress should replace the 35 percent corporate tax with a 7 percent Value Added Tax. One hundred fifty nations compete in globalization with a VAT that’s rebated on exports. The corporate tax is not rebated. Not having a VAT is killing manufacture in the United States. A U.S. manufacturer exporting to China pays the 35 percent corporate tax and is levied a 17 percent VAT when its exports reach Shanghai. But a manufacturer in China exports to the United States tax-free. Last year, the corporate tax produced $181.1 billion in revenues. A 7 percent VAT for 2011 would have produced $872 billion in revenues. Cancelling the 35 percent corporate tax and replacing it with a 7 percent VAT releases a trillion dollars in offshore profits for Corporate America to create jobs in the United States. This VAT tax cut produces billions to pay for government, creates millions of jobs and jumpstarts the economy.

In the sally port of the main barracks at The Citadel is a plaque by Robert E. Lee: “Duty is the sublimest word in the English language.”   If we can get the President and Congress to do their duty, the country can go back to work. 


Fritz Hollings, D-S.C., retired from the United States Senate in 2005.
Feedback

Anti-South bias gets old

To Statehouse Report:

[On your column about the anti-South book]: Gets old don't it?!  Andy, I have breakfast with some retired folks from up North once a week. Talk about attitude. And some of them think we are not aware of their bigoted and snide comments.

-- Steve Johnson, Arnoldsville, Ga.

Story on media coverage was on target

To Statehouse Report:

Your article about the change in news media coverage was right on. But the bigger issue is the slant that the reporters of today put on the news. There is no longer any “NON-BIASED” reporters. An opinion is one thing, but, slanting the news to your brand of politics is just wrong.

-- Kathy Luttrell, Cowpens, S.C.

Never heard anyone who wants to move to Oregon

To Statehouse Report:

I have written you [columnist Andy Brack] several times "griping" about some of your comments.

Well when you write something that I agree with I feel I should write and let you know. It is your defense of the South against a book and an author. We have a "seniors golf group" and at least 50 percent do not speak Southern. We play three days a week and have a great time. The only time “Yankee” or “rebel” is mentioned is in the club house in a joking manner.

I am not sure but I have never heard anyone say, "I think I'll move to Oregon." Ain't gonna say that about the South.

-- Jerry Smith, Florence, S.C.

Drop us a line.  We love hearing from our readers and encourage you to share your opinions.  But you've got to provide us with contact information so we can verify your letters. Letters to the editor are published weekly. We reserve the right to edit for length and clarity.
We generally publish all comments about South Carolina politics or policy issues, unless they are libelous or unnecessarily inflammatory. One submission is allowed per month. Submission of a comment grants permission to us to reprint. Comments are limited to 250 words or less.  Please include your name and contact information.

Scorecard

Thumbs up on trade mission; down on Harpootlian

Transparency. The S.C. Press Association is asking public officials to sign a “transparency pledge” to ensure ready access to documents and … stuff. More.

Biz. Boeing is expanding its Charleston-area plant, as the first plane built there was picked up this week, Continental is selling its new tire built in Fort Mill, ICAR partnerships are expanding, and Gov. Nikki Haley is leading a 450-person strong weeklong trade mission to Tokyo beginning this weekend. More.

Get some soap. S.C. Democratic Party Chairman Dick Harpootlian likened Gov. Nikki Haley making comments from a basement studio in the NASCAR Hall of Fame in Charlotte to Eva Braun “down in the bunker.” More.

SCSU. Cutbacks, students leaving, hiring freezes, and a $5.5 million deficit. More.
Stegelin

Foot in mouth (again)


Also from Stegelin:  8/31 8/24 8/17 8/10
credits

Statehouse Report

Editor and Publisher: Andy Brack
Senior Editor: Bill Davis
Contributing Photographer: Michael Kaynard

Phone: 843.670.3996

© 2002 - 2014 , Statehouse Report LLC. Statehouse Report is published every Friday by Statehouse Report LLC, PO Box 22261, Charleston, SC 29413.
Excerpts from The South Carolina Encyclopedia are published with permission and copyrighted 2006 by the Humanities Council SC. Excerpts were edited by Walter Edgar and published by the University of South Carolina Press. Statehouse Report has partnered with USC Press to provide readers with this interesting weekly historical excerpt about the state. Republication is not allowed. For additional information about Statehouse Report, including information on underwriting, go to http://www.statehousereport.com/.