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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.
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
6/25: A girl
can dream, right?
Another great cartoon from Bill McLemore:
 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.
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
- 6/14: Wealthy
control the debate, Municipal employee, name withheld
upon request.
- 6/13: On
target, Bob Henderson, North Charleston, SC
- 6/13: Do
your homework, Ralph Bristol, Greenville, SC
- 6/12: Neanderthal
thinking, Natalie Mann, Bluffton, SC
- 6/12: Right
on property tax reform, James A. Fleming, Bennettsville,
S.C
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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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In each issue of Statehouse Report, you'll get:
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