S.C. Statehouse Report
Sunday, June 25, 2006
VIEW: http://www.statehousereport.com/columns/06.0625.bettersouth.htm


South Carolina can do better by modernizing tax code
By Andy Brack
Publisher
SC Statehouse Report

JUNE 25, 2006 -- South Carolina's economy has changed considerably since the 1930s and 1940s. The days of travel on dusty, bad roads are gone, replaced by Interstate highways and airplanes. Gone are most afternoon newspapers, a lot of mill villages and corner stores. In their place are modern communications networks, factory farms and consumer superstores.


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But as the economy has changed and millions of new residents have flocked South, many aspects of Southern tax systems have remained static. Income tax structures in South Carolina, for example, have changed little from the times when $12,000 was a good annual income. Likewise, the sales tax has continued to focus on goods purchased from local merchants, even as more and more shoppers are buying services and shopping online.

In other words, today's marketplace is fueled increasingly by services and knowledge rather than the goods-driven economy of the 20th century. Southern state governments, including South Carolina, haven't adapted.

That's the conclusion of a new policy book by the Center for a Better South, a non-partisan, non-profit I've headed for the last couple of years. In its new book, Doing Better: Progressive Tax Reform for the American South, the Center argues it's time for state lawmakers to modernize tax structures for the new economy. But instead of reform that focuses on one aspect of a state's taxing structure, state lawmakers need to look at tax codes holistically and examine all components - the income tax, sales tax, property tax and others - to make sure they're working in the midst of today's global economy.

In the Center's analysis, which was written by a team of budget analysts, South Carolina scored among the lowest states in the South for enacting progressive tax reforms. While the state got high marks for dealing with hidden income tax increases by indexing income taxes for inflation, it has a long way to go to create a truly progressive tax structure.

One new idea is a refundable earned income tax credit, which the Palmetto State could implement to make its tax structure more progressive and help bring working families' incomes above poverty. In 2003, some 414,707 South Carolina taxpayers claimed a federal earned income tax credit worth $779 million. If the state enacted a similar tax credit set at 10 percent of the federal level, working S.C. taxpayers at the bottom would get an additional $79 million in credits - - enough money to help lift many out of poverty.

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Another idea: Even though South Carolina's economy is shifting more toward services, its government only taxes 34 out of 168 services identified by the Federation of Tax Administrators. If it taxed more services, it would reduce hidden preferences given to services. An example: If a state taxes the purchase of a lawnmower (a good), but doesn't tax landscaping services that cut people's lawns, there's an institutional preference for the service over the good. Taxing the service would make the sales tax fairer - and generate more revenue for the state. With more money from taxed services, the state could lower its overall sales tax rate or invest in state programs and services.

Modernizing state tax codes can make them fairer and more representative of today's complex and rapidly changing economy. Among the 11 ideas explored in the book:

  • Southern states lose billions of dollars every year through special tax breaks, exemptions and holidays;

  • Southern states like South Carolina can improve public health by raising the cigarette tax to the national average;

  • Southern states can provide fairer relief to seniors; and

  • Southern states can take proactive efficiency actions to increase accountability and improve government performance.

If we want to maintain our republican system of democratic government, and if we want to ensure all Southerners can pursue the freedoms they're guaranteed, we have to ensure government's framework is strong enough to make those things happen.

Taking a long look at how South Carolina raises revenues and trying to make those ways fairer will make the state stronger. The time is now.

Andy Brack's new book of commentary, Bugging the Palmettos, is available for $15.00. Click here for more.

Recent commentary

lighter side
6/25: A girl can dream, right?

Another great cartoon from Bill McLemore:

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feedback
6/19: Decent wages, more needed

To the editor:

None of the tax rate would be so hard if we got paid a decent wage. Property personal income on a vehicle is outrageous. You have to drive a substandard car that breaks down on every curb. If you happen to be able to afford a half decent one, the property tax you surely can't afford.

Most states do something we can see with the money they take in. S.C. does nothing for the low-income people, as far as fixing up houses for the elderly.

-- Mary Mack, St. George, S.C.

6/19: Better attitude needed on education

To the editor:

Enjoyed your article summary of the problems of education in our state. (Commentary, 6/18) We need more discussion, no doubt.

Think about it for a minute. My bet is that at least one quarter of the young people starting high school in any state haven't a clue why they have to go to school; my bet is that their reply would be....."It's a state law".

It is downright human nature that as soon as you tell someone to do something, their immediate thought or question is "Why?" I would offer the thought to you that the majority of young people in school today do not know the why.

I suppose the answer to that question might be debatable by the academic community. To me, it is simple and basic. The reason you go to school is to prepare you for a job. Yes, I understand the ancillary reasons such maintaining a culture or that democracy requires an educated input. But the preparation of a lifetime effort in something that perfectly would be one's passion is all summarized in one word......a job.

If our teaching professionals realized this and starting from Kindergarten brought this objective in life to early realism, you would see a different culture. Young people can absorb it early on........I've seen it done.

Those of us who are successful and happy in life are there because we set a goal and sometimes many attempts of goals until we get the right pathway. Why can not you write about the "why," instead of the the faults of parents, teachers, administrations, buildings, drugs, sex, legislators and school committees? What are we suppose to stop for, to look for, and to listen for? This is not about money. It is about attitude.

I do commend your writings about it. Can't we sharpen the pencil?

-- Otto Wahlrab, Hilton Head Island, S.C.

6/18: Look at ability to pay

To the editor:

The whole problem for the education system is money as everyone speaks. We need to increase taxes on businesses who have the ability to pay them. We need to increase sales tax or remove all the sales tax exemptions, which are based on your ability to pay . We have sales taxes on cars, trucks, airplanes, boats and RVs that is based on your ability to pay; but you let the rich have relief on the harsh tax on expensive things. We need to remove all the property taxes on personal homes as this IS NOT based on your ability to pay.

-- David Whetsell, Lexington ,S.C.

Recent feedback

scorecard

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

Thumbs up

DOT. The state Department of Transportation is helping with four non-profit organizations in Charleston with their treasuries and aiding collectors who remember - fondly or otherwise - the old Grace Memorial Bridge that brought US 17 traffic into and out of Charleston for more than 60 years over the Cooper River. The non-profits have turned railings from the old bridge, now replaced by the Arthur Ravenel Bridge, into 4,000 medallions of 3 inches each, complete with a certification of authenticity. And there used to be those who cursed the old bridge as no good, even when they drove on it.

Forests. To the grassroots among us, a pat on the back. The Bush Administration's proposal to sell off 1,100 acres of the Francis Marion National Forest, 5,500 acres of Sumter National Forest and 30,400 acres of other forestland in the nation resulted in about 130,000 public comments, almost all but a few developers against the sale. Agriculture Under Secretary Mark Rey said the sale will in all likelihood be stopped in Congress this year, but may be recycled next year. A new list of lands for sale will come out soon, but it sounds as if the trees will live instead of die for the most part.

In the middle

Tenenbaum. A hip-hip-hooray to the General Assembly and the state superintendent of education, Inez Tenenbaum, for providing and ordering the 630 new school buses that are the first new state school bus purchases in a decade. The cost of $36 million was provided by the legislators who overrode a veto by Gov. Sanford. Tenenbaum has asked for years for more new buses, turning to used ones from another state when the funds did not come through. The Legislature could have have made the payout even better by making sure school buses are replaced in full every 12 years, but the Assembly voted that cycle down.

Thumbs down

Jenny Sanford. The governor's wife, Jenny Sanford, is meddling in Palmetto politics by sending an email out that says she will be voting for Mike Campbell for lieutenant governor, even though she's not really endorsing him. Huh? Get real. Thanks for "sharing." Read the non-endorsement endorsement, LaurinLine.

Lawmakers. More than 20 percent of South Carolina lies in wetlands, ranging from rare Carolina Bays on the coast to coastal salt marshes. The wetlands help many species of wildlife to survive, but only some of the wetlands - those specifically labeled as "isolated wetlands" - are not protected fully by South Carolina. So far, the Legislature has not passed a law that would protect those wetlands, including about 2,000 acres victimized by a US Supreme Court ruling in 2001. The Supreme Court has since added to the pressure to protect wetlands in a ruling last week, putting the pressure on the General Assembly to do its duty.

Brown. And no more than an oil slick to the US House of Representatives' committee that voted last week to allow oil and natural gas drilling off the South Carolina if the state approves. Both the full House and the Senate must also approve the bill, but the fact is that until now, the drilling had been banned, but US Rep. Henry Brown, R-Hanahan, backed natural gas drilling, while Rep. Jim Clyburn opposes the drilling. Other South Carolina representatives are said to support natural gas drilling. Still, it may be left up to the General Assembly, a questionable entity on the environment.


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AVAILABLE NOW: Furman University's Don Gordon has great things to say about Andy Brack's new book of commentaries, "Bugging the Palmettos." Click here to learn more and buy the book -- only $15.00!

Just a quick note to let you know how you missed out this week. If you were a subscriber to the paid edition of Statehouse Report, you would have received the information below on Friday AND you would have gotten other special features:

  • NUMBER OF THE WEEK: $4.4 billion
  • HOT ISSUE: Editor Jerry Ausband talks about how runoffs hide some stakes
  • RADAR SCREEN: Many issues abound
  • PALMETTO POLITICS: Money keeps rolling along
  • BLOGROLL: Unmasking the money
  • MEGAPHONE:Moving education forward

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