That’s right, I didn’t have a column today. Not out of laziness, I assure you — as plausible as that explanation may sound — but because I thought it worth making room for our full-page editorial overview of the main issues that should be considered as the state embarks upon tax reform.
Comprehensive tax reform, of course, has long been one of our favorite hobby horses, right up there with government restructuring. But here we put most of the main principles involved in one place. I urge you to peruse it, and use this post as a forum for sharing your thoughts on the subject. Or better yet, write us a letter to the editor.
Or best of all, write or call your lawmakers, and urge them to carefully consider the good of the whole state in changing our tax laws for the better.
Related Posts
Aren’t there aspects of the newspaper business that are untaxed? If so, why can’t TheState newspaper show a little leadership and forfeit any tax exempt status that it now holds? This would A) Enrich state government coffers (which Brad SO loves to do with money earned by hard-working citizens…put YOUR money where your mouth is Brad), B) Strengthen the free market system by eliminating the unfair competitive advantage now enjoyed by TheState, C) Give Brad much more credibility whenever he launches into his next epic explaining why ANY tax cuts are just wrong, wrong, wrong. Just last week TheState ran yet another in a long series of articles demonstrating the corruption of government in South Carolina (you remember…the one about Richland County Council holding important meetings outside of Richland County and away from the scrutiny of Richland County citizens). And yet, what is the pitch and tenor of this weeks’ tax sermon by Brad and the boys (sorry Cindi)? Why, we need to INCREASE taxes of course! Oh yes…we need to RAISE fuel taxes, RAISE tobacco taxes, ELIMINATE tax exemptions (which may not be a bad idea, but Brad gets zero credit on this one), and BEGIN taxing nearly ALL services. Way to go Brad…B for effort, F for content. A solid C–/D+. Just like always. What do you say though…how ’bout it? You’re a proactive guy. why not lead a little with a forfeiture of YOUR tax exemptions? I’m not talking about constitutionally-mandated tax exempt status for newspapers…I KNOW you can always hide behind that…I’m just asking why not go ahead and volunteer to do what you clearly preach is the right thing all the time…forfeit your tax exemptions for the betterment of South Carolina. After all, in your article you say it’s the right thing to do for the rest of us. If it’s good for us isn’t it good for you too? Hmmm? Fritz
My first thought on reading through page D2 was, “What do these people know about tax systems?” My second thought was, “Well, they probably know as much as our legislature.”
My concern is that the article seemed very simplistic and naive and was heavily biased toward more government. For example, the first point in The Big Picture is that the overall tax system must “Generate the money to meet state needs.” In the text itself, the phrase is “…meet our agreed-upon needs.” I question whether there is a list of agreed-upon needs. Beyond that, there seems to be an implication that the needs and their costs are a given. Anyone in private business would recognize that there are many ways, at many different expense levels, to meet “needs” and that some needs are much more important than others and would be trying to figure out the most efficient and effective way to meet the most important needs given the resources available. Only the very wealthy are able to meet all their financial needs, and I don’t believe the government should be in that category.
The second point says that the tax system must “Remain reliable as the economy rises and falls.” I think that is nonsense given the simple truth that the total amount of money available is greater in a strong economy and less in a weak economy. If the government take is to remain constant through good times and bad, it must be true that the fortunes of the individual citizens will move in much greater cycles than those of the underlying economy. Is that really what you meant?
I could ramble on and on, but it seems to me that a more reasonable approach would be to figure out what a reasonable level of income for state government is given the size of the economy and then figure out the best way to use that amount of money to meet critical needs and responsibilities of government while enhancing the ability of the economy to grow and provide greater resources in the future. After all, economics is all about the allocation of scarce resources, not about meeting lists of needs.
The problem with the approach on page D2 is the insatiable appetite of government for money. As the SC educator told John Stossel on TV a couple of nights ago, there is no limit to how much we should spend per pupil on education…the more the better. I think she even suggested $20,000 or $30,000 per pupil.
Brad, I don’t know much about all the ins and outs of this, so I won’t try and comment. I also won’t attempt to assume to know, as apparently others have, how much taxes you pay, or how many exemptions you get!
I will only say, as an evangelical Christian, I appreciate the suggestion in the editorial to at least attempt to implement Biblical truth by not using the sales tax to further burden the poor. Or the suggestion to eliminate the ceiling on taxes on luxury cars. Mennonite theologian Ron Sider lays all this out well in his book, “Just Generosity” http://www.covenantbookstore.com/igebyrojsi.html, which I highly recommend.
I have to chuckle when people in this state get up tight about taxes. Sometimes I think they should live abroad for awhile, and find out what the word “taxes” really means. Not that I don’t blanch like everybody else when I get my property tax bill. But hey, I can afford to own my own home. That’s something well more than half of Americans can do, which is not the case in most other countries in the world.
I hope this is taken as more than just naive support of your view. I don’t always agree with you. There are many complicated issues in all of these things. I do however appreciate the State’s editors’ attempts to point out the obvious problem that we cannot have our cake and eat it, too. We like having the police when we need them (at least some of us do), we just don’t want to pay them for doing their job.
I did not assume anything about how much TheState pays in taxes. I am simply suggesting that it might help their credibility and make them look a great deal less hypocritical if TheState were to take the medicine it recommends so highly for the rest of us. I chuckle too. But mostly what makes me chuckle is when someone actually tries to make the specious and silly argument that we ought to feel better about our ridiculous taxes because taxes are higher somewhere else. Tax rates people are forced to pay in places like Britain, Germany and France are tremendously high because these countries are either completely or semi-socialist welfare states. They deserve the taxes they pay and the government they get, and it has nothing to do with us except to serve as an outstanding example of what we want to avoid at all costs. To suggest that we ought to be happy because we don’t pay what they pay is to miss the point entirely. We ought rather to take note and resolve to never follow in their steps. Fritz
Ah, I always forget how miserable I was while living in Germany. Yes, it must have been really terrible. Too bad that I did not realize it at the time. I might have come back to the U. S. much earlier. Who knows, I might have not had pre-existing conditions, so that I could have gotten health insurance with a regular company. And I might have enjoyed much earlier the thrill of knowing that anybody can sue me at any time for anything. Since I love to take risks, living here is of course like heaven. Oh, and I forgot to mention the huge trucks and SUVs hurtling at my little Sedan, since it is the right of every individual here to burn as much fuel as he/she likes.
Don’t get me wrong, I appreciate the US — it fought for Germany’s freedom. But the rest of the world is not as awful as some people think it is.
We’ve been here before, as Mike knows. I still think I have a valid point, though it is one-sided, I will admit.
Brad, The tax page was interesting. At first glance it seems that the real problem with implementing a fair state-wide tax system is the disparity between the various regions of the state. The beaches have thousands of condo owners who are essentially part-time state residents and tourists. The upstate has more industry and obviously less poor and minority. The Pee Dee has the rural poor and the large landowners, i.e. the farmers. The Midlands has the capital and a large business and medical focus and a lot of urban poor. Each area has it’s own anomalies with property values soaring at the beaches and on the lakefronts and in the south suburbs of Charlotte. The rest of the state is seeing almost no growth. I think all of these factors need to be considered at the core of any tax change proposals.
I was somewhat disappointed to see the State advocating more dollars for education, especially right after a state judge just ruled that facilities and resources are adequately funded and provided by the state. We had just had a thread on this blog where there seemed to be a consensus from left and right that broken families and poor parenting are the problem, not educational opportunity. Ignoring that aspect will only guarantee that the problem will be here forever.
To me, the answer is to cut business taxes to the bone. New industry will pour in which will grow the tax base and the state economy. I hope by now we have all learned circa JFK, Reagan, and Bush tax cuts that you grow the economy by incenting people and business, not by taxing them.
Herb, it sounds to me like you settled down in the wrong place. If Germany was such a great place, why didn’t you stay? Seriously? I’m not arguing that our country is perfect, but holy cow, I love it more than any other place on this planet! And having made a career in the military, I’ve been to dozens of other countries, and actually lived long- term in about four. Are you actually arguing that nationalized health care is a good thing? I would like two examples please of industries that our government has taken over from the private sector and not ruined or at least damaged, either by reducing service, increasing price and scarcity, or both. I don’t think one can honestly say there are any. And I believe the LAST thing we want is nationalized healthcare here…we can look at Britain and Canada to get an idea of what we’ll have. Sure your pre-existing condition would be covered, but covered in what sense? Most health services would be rationed and for the vast majority of us, decisions we freely make now about our own health care would be made by nameless, faceless and uncaring bureaucracies. No thanks. If your problem is huge trucks and SUVs, ride the bus man. Let the rest of us enjoy the freedoms we have left. Fritz
Just try riding the bus, man. You’ll see how far you get around here. For that matter, try walking, which I try and do a lot, but taking my life in my hands in the process. Believe it or not, I love this country, too, and I said, what I wrote was one-sided. But I see big problems coming ahead, and just continuing the split between the haves and the have-nots isn’t going to hack it, I don’t think. A small amount of redistribution in income is better than having a society eventually come apart at the seams. I don’t share a fundamental trust in American human nature or even necessarily in capitalism, despite Adam Smith. I used to think that way, but I don’t anymore, no matter how much Rush spouts off. I am not convinced; not anymore.
And yes, some degree of national health, or better corporations under government regulation as on the German scene (which is different from Canada and Britain, as I understand it) would be better than having half the population without any basic health coverage. The snag, of course, is human nature, again. Politicians will increase entitlements to get votes. The system can’t afford to reward people for poor choices. But neither can it afford to leave the problem to the free market to fix.
We’ve been here before, and since I don’t have the political or economic expertise to weigh in on the changes, I’ll leave that to wiser people. But I’m not in with either the Dems or the GOP, though I like things about both, at times. I also like Brad’s idea of something in the middle.
Oh, and as far as SUVs, we’ve still got 5% of the world’s population using up 80% of the world’s resources. I’m not sure the world deserves that.
Herb, You are a good hearted man but you need to spend some time reading factual sources of information. Take the 50% of Americans who are uninsured as you noted above. I dont have the website but someone who spends their career on this type of stuff disected the uninsured. My vague memory recap: high income entrepreneurs who wont buy insurance since they dont see a need, people switching jobs and recent college grads who are picked up on surveys as uninsured, but are truly short term in that category, prisoners who get “free” medical coverage, plain old people who would rather buy a boat than pay for insurance, mentally ill homeless who are offered “free” insurance but refuse to do paperwork, etc. etc. etc. You have a lot of compassion which I like but you need to get more street wise. For example, I had a renter who is still getting all kinds of medical bills from a big hospital in Columbia, SC. I see she got into the hospital under her “unmarried” name and now the hospital cannot find her. She actually had insurance thru her husband but scammed the hospital. Do you even realize how many scams and scammers are out there? I could go on with what I have seen.
On the energy, that is another liberal sound byte. Think that through, if we would only shut off the energy from America’s farmers, that would reduce the American energy usage, and cause even more starvation in the world. The people complaining about the US using a high percentage of energy are from countries that are still riding donkeys and burning cow dung for heat in the winter. Are these people for real? These people would like to have the UN in charge of how much energy we can use. So as Kofi Annan and his punk son jet around the world attending cocktail parties, you and I can be told what we can drive or how much we can drive. They would do it tomorrow if they could. Anyway, enough ranting.
Dave, your points are good, and I acknowledge them. I may be more street-wise than you think, but that is neither here nor there. Ministers do tend to be naive, that I will freely admit, especially when we have been out of the country way too long.
I’m still not convinced I am all wrong, either. I think most of us are for faith-based works, which is where I’ll put my energy when I can. But I would implore us all not to assume that most non-insured are scammers. The others are there, too. My parents both made it from poverty because they got a chance. A lot of their chance was not only because of their ethics and hard work, but because relatives gave them a little chance, and also because of FDR and his programs (I know, I’ll get killed from a few directions over that one!). But I do understand now why my Dad would not support my Young Republican values, and quietly supported the Democratic cause. He would turn Republican later, but he had little sympathy for Goldwater. One of my fondest memories of Dad was his picking up a Spanish hitchhiker in New Mexico who had nowhere to go and was looking for a straight meal. Of course, he could have gotten us all killed by a criminal and scammer, but Dad knew what it was to be down and out, and could never forget it.
Well, enough sloppy sob stories that deliver no facts, and get us nowhere. But somehow, somewhere, I just have this gut feeling that qualitative research also has a slight validity in addition to quantitative. Granted, I’ll get challenged that my research questions are all skewed . . . .
Herb,
I love this country just as much or more than anyone else on this blog, and I think you are right. Also, I think it is incredible that we’re even discussing the need for national healthcare considering that we’re now in the 21st century, and that all the other civilized Western countries solved this debate fifty years ago! It’s a moral issue-it should be obvious that everyone should have equal access to equally good healthcare, but incredibly, it’s not. The uninsured rate floats around 15.5% (totally unacceptable for a Western country), yet it is getting worse because so many people are losing coverage for parts of the year. Here are some excerpts from a USA Today article back in 2004:
Report: 82M went uninsured
By William Welch, USA TODAY
WASHINGTON – A report being released Wednesday by a private health care group estimates that nearly 82 million Americans went without health insurance at some point during the past two years. The sharp increase suggests the problem runs deep into the middle class and could have broad political impact this fall.
The report, based on Census Bureau data, estimates that one in three Americans younger than 65 were uninsured for a time during 2002 and 2003. Half were uninsured for at least nine months, and two-thirds for at least six months.
The report asserts that the problem of uninsured Americans is wider than what is suggested by the Census Bureau’s finding that 43.6 million Americans were uninsured in 2002. That figure, the Census Bureau’s latest, reflects the number without insurance for the entire year. The new analysis attempts to track the insurance status of Americans over the course of a 24-month period, as people move in and out of coverage.
The report said African-Americans and Hispanics were less likely to have health insurance than white Americans. Half of Americans 18-24 years old, typically those leaving school and beginning work, were uninsured during part of the period. But 27 million of the uninsured were children younger than 18 – more than one-third of all children in the USA.
The study found that 81.8 million people, or 32% of Americans younger than 65, were without health insurance at some point during the two-year period. That is an increase from 74.7 million who lacked insurance at some point during 2001-02, according to a similar study released last year by Families USA and the Robert Wood Johnson Foundation.
By federal law, people leaving jobs with health coverage have an opportunity to buy temporary coverage by paying the share of premiums previously paid by their employers, plus their own share and a 2% administrative fee. But because the cost is so high, relatively few people purchase such coverage, health experts say.
Source
Let’s see now. Is this discussion on SC Tax reform or on health care or what?
On tax reform, I’d want to know the impact of removing all caps and exemptions on the sales tax we already have, including on automobile purchases and various services, and eliminating the boat/automobile personal property tax. Then I would want to know the impact of eliminating the sales tax on food bought for home consumption (not on restaurants)to make the tax less regressive. If those effects were somewhere near neutral, I’d support implementation of those changes.
The tax page this Sunday was a pitiful exhibit of how little effort the editors of The State put into understanding an issue like taxation. They think that just because they run a newspaper, they can string together a bunch of generalities, declare the criteria for what tax reform must do, and readers are supposed to take them seriously.
The criteria proposed was for not stemming the rate of tax revenues increasing at rates faster than the private economy which must pay the taxes. In other words, their criteria for reform is to maintain the status quo of irresponsible spending on pork projects which enrich campaign donors of the top political bosses.
Now that the subject is back to tax reform and off of health care (which everybody gets, rich or poor, insurance or not), what about this suggestion just on income taxes.(I’m sure there are great minds on this site who can tell me what’s wrong or right with this).
Simple income tax filing. EVERYONE gets the same deductions which cover the actual cost of living. This would be housing, food, transportation, mortgage or rent, medical premiums/expenses, clothing, etc., with ceilings on each. These deductions are subtracted from gross income and the remaining taxable income is assessed at a set percentage, say 12%. This applies to all people, rich or poor, old or young, whatever. This assessment is paid “as you go” throughout the year with tax filing a one page matter. If you owe, this amount is adjusted to your next year’s taxes. Refunds are a matter of credits back to the filer for expenses noted above – no cash payments.
As for other taxes such as property, gas, entertainment, etc., they could be dealt with accordingly to make them fair, visible and stable. Sales tax especially should be on all items which are sold except for food and medicine, maybe some clothing. And, the auto tax should be on the full price of any car so that the rich pay their fair share.
The ultimate goal of tax reform should be to make taxation simpler and more visible so that less government workers are needed to collect, process and spend this money.
OK. Fire.
Sounds good to me, but whether it passes muster with all the special interest groups is another matter.
Good to hear from you again, Mark. I had a seminar with some Southern Baptist pastors recently, and I think I have a better feel for the situation here and the conservative-moderate clash. I’d have problems in either camp, I think. I’d better stay Presbyterian for the time being!
Herb
After all levels of government have eliminated spending on all programs which are not necessary to the public benefit of everyone, and authorized by law, then we can eliminate a lot of the taxes.
This issue is dividing into two black and white camps: those who want government limited to a small role for the public good, and those who want unlimited powers to tax for subsidies to special interest groups.
Here is a question for you: For any given large population, what would the long term wealth distribution percentages look like with no taxes at all? I’m talking about pure, unencumbered capitalism here. Using my best model economy program, here are my percentages (I’m rounding off because my computer has only accomplished a few iterations):
Top 1% owns 48 percent of the wealth
Top 5% owns 73 percent of the wealth
Top 10% owns 83 percent of the wealth
Top 20% owns 92 percent of the wealth
Now, using what I call a cumulative tax (small), look at the same percentages again:
Top 1% owns 33 percent of the wealth
Top 5% owns 59 percent of the wealth
Top 10% owns 71 percent of the wealth
Top 20% owns 83 percent of the wealth
Here is my proposal: eliminate all forms of taxes save one (the cumulative tax), and then implement the cumulative tax on the federal level rather than on the state or local level. So, what is the “cumulative tax”? It’s a small flat tax on wealth collected during short time intervals that is redistributed in equal measure across the population. A portion of the revenue collected would be used to run all governments in the US-dispersed in equal measure based on their populations. Everyone would pay the same tax percentage on their wealth, and everyone would receive equal credits.
The current tax system is a nightmare with a myriad of local and state governments collecting taxes. It’s impossible to predict or calculate anything, so you don’t know the real effect of any changes that you do make. My system would eliminate this problem.
Here are some other advantages:
It would reduce the egregious levels of wealth inequality that are statistically built into capitalism. We could virtually eliminate poverty in the US by setting the cumulative tax so that the top 1% would own 15% of the wealth.
It would be easy to calculate and easy to implement, therefore reducing the size of government.
It would help poor states since it would be implemented on a national level.
It would foster a fairer form of capitalism that would help people stay off of government assistance.
I see in the State today, John O’Connor has a column on how the tax reform is going. It is still very early in the process but you can already see the signs of cold feet. Leatherman talking about taking small steps is one example, and the Chamber of Commerce is lobbying hard for their interests. I can live with the higher sales tax because I know there are many people living off the books while being paid in cash etc. The sales tax is almost unavoidable so many will pay their fair share if it goes up and property taxes are dropped or lowered. I hope they do it but I say the odds are about 2 in 10 that they do.
There is no such thing as an “unavoidable” tax. In 1993, my wife chaperoned a group of youth on a visit to Russia. The family with which she stayed had a father who was a taxi driver. Despite draconian laws against being paid in anything except rubles, the father did a lot of his trade with foreigners who were willing to pay in dollars, pounds, deutschmarks, etc. In a much freer society, people would be even more ingenious in finding ways around any single tax.
“The people complaining about the US using a high percentage of energy are from countries that are still riding donkeys and burning cow dung for heat in the winter. Are these people for real?”
Yeah, Dave, these people are for real. And they aren’t still riding donkeys, let me tell you. Interesting headlines today about where gas prices are headed. Maybe somebody in this country will figure out sooner or later that we don’t necessarily have a divine right to all the energy we want to use. I’m not holding my breath, though. If we would have had a proper federal gas tax in place years ago, we might have spurned on some conservation and ingenuity. And with a proper state tax, heck, who knows, we might even have gotten our roads fixed?
The property tax should be elminated. Just reducing it is no good, because the same staff has to remain to collect less money. Also, any trade off with other taxes will just be temporary, unless the entire tax is abolished, all the records destroyed, and the workers fired.
There is currently a revenue surplus at all levels due to the high rate of economic activity. After eliminating the property tax, it should be seen if the remaining revenues are sufficient to fund a prioritized list of legal government activities.
The goal should be to fund everything with the existing sales (consumption) tax, which is most fair, and eliminate the income tax, which is a disincentive to hard work, investment and savings.
So far, the so-called “leaders” have set no priorities. Whatever pork project before them at any given moment is priority number one.
OK, we’ve “talked” about tax reform. What now?
Now we vote against any politician who wants to keep property taxes and income taxes.