S.C. Statehouse Report
Sunday, May 29, 2005
VIEW: http://www.statehousereport.com/columns/05.0529.structural.htm

COMMENTARY
State has a long way to go on solid budgeting
By Andy Brack
SC Statehouse Report

MAY 29, 2005 - - A friend observed this week that he buys shirts online because it's easy and he can avoid the mall.

He, like millions of others, has shifted in the way he buys things to make life easier and take advantage of innovation.

But most states, including South Carolina, continue to use archaic tax systems that don't respond to changes in the way people behave, live and do business. And that's why, in large part, South Carolina faces a looming budget crisis in coming years unless something is done.

A new report says South Carolina is among 11 of the states in the nation that face the highest risk of not having enough money down the road to pay for its current level of programs and services. Because of the way the state's tax system is set up, its shrinking tax bases will grow at a smaller rate than the costs to maintain government programs at current levels.

So while South Carolina now might have a balanced budget and the first surplus in years, it has a long-term structural deficit and scores poorly on each of 10 risk factors identified by the Center on Budget and Policy Priorities (http://www.cbpp.org).

"We're not trying to tell any state that they should have higher taxes," says CBPP Deputy Director Iris Lav. "But do you have a tax structure that keeps up with the level of services you choose?"

In South Carolina, the answer is a solid no. Take a look at just a few of the risks, as identified by the Center:

Shrinking tax bases. The state's sales tax base has shrunk 13.4 percent since 1990 - - much higher than other states - - and covers less household services than other states. It doesn't help, for example, that South Carolina has more than 60 sales tax exemptions that could generate $1 billion a year in tax revenue if they were off the books. Also importantly, the state's corporate tax base has shrunk 6.6 percent so that corporations are paying less of their share of government.

"There's definitely a shifting of the tax burden that's been going on for the last 10 years," said State Revenue Department Director Burnie Maybank.

Internet/catalog sales. The state is missing up to $395 million in sales taxes revenues because people have shifted to buying things through the Internet and catalogs. Maybank says the number is much lower - about $80 million - but agrees the tax structure is set up to make it tough to collect taxes from these sources.

Seniors. According to the study, seniors in South Carolina get tax breaks that exceed the average. Meanwhile as a group, the growing elderly population will cost the state more to provide services in future years. The continued costly growth of Medicaid, for example, poses the biggest threat to the budget because it squeezes money from other programs, Maybank says.

Brackets. The state's top tax bracket is $12,300, which means most people's incomes are taxed at the same levels. Because brackets don't reflect a real cross-section of incomes, lower income people end up paying more than their fair share.

What's happening in South Carolina, much like at the federal level, is that people want government to perform, but they want to pay less.

"They haven't modernized the tax structures, but people expect schools to have computers and they expect hospitals to have MRIs so the costs of services that states are providing are going up," said report co-author Liz McNichol.

Options to reduce the risks from a structural deficit in the future include:

• Removing sales tax exemptions, which will grow the sales tax base.
  
• Close corporate tax loopholes
  
• Stop giving income tax cuts, especially to the rich.
  
• Eliminate tax breaks based on age, but consider them based on income.
  
• Simplify the sales tax structure to make it easier to collect sales taxes on Internet and catalog sales.
  
• Conduct longer term projections on spending and revenues, including growth in cost of services.

Lawmakers need to wake up to budget realities and resist the urge to try to give people something for nothing.

RECENT COMMENTARY

• 5/22: Little time left, but still lots to do at Statehouse
• 5/15: Public service has one master, not two
• 5/8: Governor more vulnerable than you think
• 5/1: House could be vastly different next year
• 4/24: The case of the Neanderthal and Man of Thin Skin
• 4/17: Time for state to develop policy about smoking
• 4/10: Wedge politics are alive and well in SC
• 4/3: State has moral obligation to fund rural schools
• 3/27: More disclosure needed to highlight influence peddlers
• 3/20: Voucher bill could lead to school resegregation
• 3/13: Sanford's wolf tactics wearing thin on lawmakers
• Have a comment? feedback@statehousereport.com
  

McLEMORE'S WORLD
5/29: On Memorial Day

Another great cartoon by Bill McLemore:

• To send a message to cartoonist Bill McLemore, write info@statehousereport.com
  

LEARN MORE DAILY

The best way to get South Carolina news is to augment your morning paper and TV show with SC Clips, a daily executive news summary compiled from more than 30 state newspaper and TV sources. It's delivered every business day and is packed with news of statewide impact, politics, business and more. Subscriptions are affordable at $30 per month -- and less for business subscribers. More: SC Clips.

FEEDBACK
5/22: Sanford is wrong for SC

To the editor:

Governor Sanford constantly lectures us that he is all about getting a great return on our tax dollars; and that he also wants all South Carolinians to have a better quality of life, and to increase trade and wages. That is great, I could not agree more.

So what is with all of these vetoes? Especially the veto of funds to help the struggling community of Willington in rural McCormick County? The funds earmarked for that community amount to seed money to enhance tourism and
ultimately income, and more jobs! Let's see that sounds like a good investment of tax dollars that will net an increase in the quality of life for Willington Citizens, and increase in wages. WOW, sounds like that money is in line with helping meet the Governor's goals. What gives. I think this can be explained by looking at the Governor's background of wealth and privilege. He does not know what it is like to live from pay check to pay check, to have to work nights and weekends just to feed the family. He is not even a native South Carolinian! And you know, he never sponsored legislation in Congress that resulted in any change or improvement. This
man is all talk - and no action. He could not get a consensus to get himself out of a wet paper sack!

Furthermore, He is also an egg headed Libertarian and he allows these pointy headed ideas to over rule common sense. This is not pork! This is about helping people to help themselves. But Mark cannot understand that, after all this is the same Mark Sanford who tells poor black children in Allendale County that they can have better schools if they just study harder, and their parents pay more taxes, and get local business to pay for school related expenses. Sure Governor, and I have lake front property for sale at a real deal in the center of the desert in Saudi Arabia!...

Again, in his defense, Mark not being a real native of South Carolina, and of course very wealthy and privileged, does not have a clue about what it is like growing up in rural South Carolina. If he did he would know what a tremendous blessing Santee Cooper was and is....to all of us. We are not interested in this particular business making a profit on the backs of South Carolina Farmers and hourly wage earners in rural South Carolina!!!!!!

Many years ago, the only way electricity was delivered to rural, underdeveloped, and poor South Carolina was and is through the South Carolina Electrical Cooperatives. These co-ops provide a real deal for rural South Carolinians, and having experienced it first hand, I think they do a darn good job.

-- Sandy Gibson, Lexington, S.C.

Here's some recent feedback to Statehouse Report:

• 5/9: Governor doesn't care for Average Joes, Sandy Gibson, Lexington, SC
• 5/9: Disgusted with what passes as a Republican, Janet Upshaw, Taylors, SC
• 5/9: Attack on Sanford is liberal hogwash, Lew Richards, Manning, SC
  
• 5/2: Still upset about Altman's comments, Kevin Tarrance, Jacksonville, Fla.
• 4/27: Santee Cooper is government socialism, Hugh Campbell, Hartsville, SC
• 4/25: Marching against Altman, Shavone Gadsden, sophomore, Columbia College
• 4/24: Bravo on Neanderthal column, Natalie Mann, Bluffton, SC
• 4/21: Is Altman brain-dead?, Tony Martin, Mount Pleasant, S.C.
• 4/20: Keep focus on issues, Laura Morris, Mount Pleasant, SC
• 4/19: Doing crime without the time, Teresa Carrigan, Cassatt, SC
• 4/19: Shocked at smoking usage, Bruce Maston, M.D., J.D., Hilton Head Island, SC
• 4/18: Primary seat belt law needed, Judy P. White, Calhoun Falls, SC
• More FEEDBACK
  
  

KEEPING TRACK
House will be different

This section tracks past forecasts by Statehouse Report with other media reports:

SOUTH CAROLINA SCORECARD

Here's a "thumbs up" and "thumbs down" related to various political events from the past week:

Thumbs up

Wilkins. Hats off to House Speaker David Wilkins, who was confirmed Thursday night unanimously by the U.S. Senate to be America's new ambassador to Canada.

Peeler. Congrats to Sen. Harvey Peeler, R-Cherokee, who was elected the new Senate majority leader. He'll follow Sen. Hugh Leatherman, who will resign on Aug. 1.

Reese. If you thought changes to the Senate rules this year would completely keep the Senate from breaking down. Sen. Glenn Reese, D-Spartanburg, proved it could be shut down with a parliamentary manuever this week.

Thumbs down

Sanford. Some 95 percent of the governor's vetoes were overridden. His press secretary attacked House members. Some senators say the governor has become irrelevant in the governing process.

Santee Cooper. Santee Cooper board member Keith Munson rightly finally resigned amid complaints of micromanaging. Sanford withdrew nominations of two others to the board.

Bauer. The Free Times reports that the S.C. Department of Transportation bought 1/10th of an acre from Lt. Gov. Andre Bauer for $130,000 -- some $47,500 more than it was appraised. The deal smells. More: http://www.free-times.com/News/newsmain.html#bauer


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