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2002-2004, South Carolina Statehouse Report. Published weekly during the S.C. legislative session. South Carolina Statehouse Report is a media project of The Brack Group, Charleston, S.C.

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1.13: Tax cuts sound good, but planning best
(Week of April 2, 2002)

MARCH 29, 2002 - - Republican candidates for governor seem to be trying to outdo each other on the tax-cut bandwagon. But in a budget year that, at best, is a mess, all of this tax-cut talk seems out of synch with how the General Assembly is struggling to make up a $350 million shortfall.

To date, here's what the four leading Republican candidates have devised:

  • First came solemn Mark Sanford who wants to kill the state's personal income tax over 18 years and replace revenues with a 5-cent gas sales tax hike.
  • Then there was aggressive Charlie Condon who is campaigning for a constitutional amendment to eliminate local real and personal property taxes. He proposes making up the difference by closing $1.3 billion in sales tax loopholes and using a combination of savings, more sales tax or new "service fees."

  • Next to arrive was grave Jim Miles, who pledged to abolish property taxes. According to The State, he had no real plan on how to make up revenue reductions, but said cuts in government's size, caps on spending and economic growth would make up the difference. One Republican economics expert said relying on growth to replace the lost revenue was "borderline irresponsible."

  • And on Thursday came demure Bob Peeler, who said a Peeler administration would cut taxes and clean up the state's budget problems. How? Through economic development.

While tax cuts have a nice ring for voters, a few people around the Statehouse quietly are questioning whether politically-expedient tax cuts are really a good idea. House Ways and Means Chairman Bobby Harrell and Senate Finance Committee Chairman Hugh Leatherman have committed to a joint tax review process after this legislative session that would take a long look at the state's tax structure. Separately, they have said a comprehensive approach is more important than myriad narrow attempts to cut taxes without an overall state strategy.

That approach makes sense, according to economists. Because of South Carolina's mix of property, income, sales and corporate taxes, the state's revenue base is pretty solid.

"Of all tax dollars collected at the state and local level in South Carolina, sales taxes account for 36 percent, individual and corporate income taxes together account for 28 percent, while property taxes make up 27 percent," economists Doug Woodward and Donald Schunk wrote in The State earlier this month. "These contributions to total revenue are almost identical to national averages."

The diverse taxing mechanisms employed by government make it more stable and resistant to general economic downturns. For example, if the state got rid of property taxes - - which are considered extremely stable - - in favor of added sales taxes, it would be harder for the state to generate revenues it needed to provide needed government services if the economy took a downturn. Why? Because taxpayers tend to save money in lean times, which means they're not spending as much money and, in turn, providing less in sales tax to the state.

"There's no tax that is perfect," another economist told Statehouse Report. "But we have a very well-balanced system in South Carolina. You have to be careful about tax cuts. They are politically appetizing, but they shift the burden to another portion of the population."

If the state's lawmakers move forward with a joint tax review commission that looks at the big picture and provides a meaningful roadmap for real changes into the state's tax structure, South Carolina could build a balanced 21st Century tax system that will be the envy of every state. Over the next two months, you'll be able to tell how serious the Legislature is about real tax reform by looking at whether they pass legislation to appoint such a commission.

11/3: Use your vote wisely: a lesson
10/27: SC GOP to keep control of House
10/20: Black voters may be secret weapon
10/13: Talk is cheap; action takes courage
10/6: Creating sunshine to dampen negative ads
9/29: SC Set to be world leader in news research
9/22: SC Senate shift could be around corner
9/15: Gov's race about barbs, ads, not people
9/8: Shorfall may cause look at prison alternatives
9/2: Revitalize your patriotism by participating
8/25: S.C.'s fiscal situation could be a lot worse
8/18: State wetlands policy needed
8/11: The bully vs. the whiner
8/4: Noah's Ark approach to tax reform
7/28: Two-party system could be political outcome
7/21: State budget woes loom for 2 more years
7/14: Agencies can do better job on Internet
7/5: Thank a guardsman today for service
6/28: Hodges-Sanford race will be wild ride
6/21: Sanford-Peeler race's impact on GOP
6/14: Ethics reform needed now

More done than you'd think(1.23)
More education $ also means cuts (1.22)
PSC reform to come, but when?(1.21)



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