Could we finally get comprehensive tax reform?

One of our perennial hobbyhorses on The State‘s editorial board over the years was our demand for comprehensive tax reform.

We wrote about it a lot, whether you remember it or not. Which you probably don’t. It’s not the sort of issue that makes most people’s hearts go pitter-pat — even those interested in tax changes. (Readers would complain, “All you ever write about is the Confederate flag!” Or video poker. Or the lottery. Or whatever they didn’t want us to write about. To which I would say, “No we write about a lot of issues.” “Like what?” “Like comprehensive tax reform.” “Comprehensive what…?”)

Our point was this: Instead of making more and more piecemeal changes to tax policy, further distorting the tax burden in the state, how about if we act like we have some sense and do this: Figure out what it costs to do the things we agree state government should do, figure out how much it costs (that is to say, budget reform), and then come up with the fairest, least burdensome, most reliable ways to raise the money to pay for it.

Instead, year after year, lawmakers came charging into Columbia, determined to give this or that tax break to this or that constituency group — whoever was yelling the loudest at a given moment (say, people who owned homes that were rapidly appreciating) — without any regard to the system overall. Increasingly, that led to such things as relying less and less upon such stable and rational revenue sources as real property, and more and more reliance on such volatile — and oppressive to the economy — sources as sales taxes.

Years ago, I could have given you a list of specific things that needed addressing, but I’m not as up-to-date on the details today. Of course we should do away with the sales tax cap on cars. In fact, we should take all sales tax exemptions and throw them onto the table. Let the constituency for each have its say, but in the end, spread the pain around. You can’t make everybody happy.

(This is Doug’s cue to say, “Why don’t you start by calling for doing away with the sales tax on newspapers?” To which, as usual, I say, “Why? That’s not one of the more egregious ones, like the auto cap. It’s pretty average. Throw it on the table with the rest, and let only the most rational exemptions, if any, survive.” I’d be surprised if the newspaper one was allowed to stay.)

Trouble is, there’s little appetite for the holistic, good-government approach. Until maybe now:

Speaker Lucas Appoints House Tax Policy Review Committee

Member panel tasked with offering suggestions to reform outdated tax code

(Columbia, SC) – House Speaker Jay Lucas (District 65-Darlington) today appointed fourteen members of the SC House to serve on the House Tax Policy Review Committee.  This ad hoc committee will be responsible for reviewing South Carolina’s current tax code and submitting suggestions for reform to the Speaker before the beginning of next legislative session. The group will hold its first meeting next Tuesday, August 30th, 2016, at 2 P.M. in room 516 of the Blatt Building.

Speaker Jay Lucas

Speaker Jay Lucas

“Our outdated tax code needs a dramatic transformation in order to promote economic competitiveness and increase the size of our citizens’ paychecks. Achieving this difficult task is long overdue, but necessary to ensure our tax code is fair for our taxpayers. A broader and flatter tax code will help continue to spur job growth and provide greater opportunities for South Carolina families,” Speaker Jay Lucas stated.

Speaker Lucas selected Speaker Pro-Tempore Tommy Pope (District 47-York) to serve as Chairman of the House Tax Policy Review Committee. Additional members include: Rep. Todd Atwater (District 87-Lexington), Rep. Bill Bowers (District 122-Hampton), Rep. Mike Burns (District 17-Greenville), Rep. Joe Daning (District 92-Berkeley), Rep. Chandra Dillard (District 23-Greenville), Rep. MaryGail Douglas (District 41-Fairfield), Rep. Shannon Erickson (District 124-Beaufort), Rep. Joe Jefferson (District 102-Berkeley), Rep. Jay Jordan (District 63-Florence), Rep. Roger Kirby (District 61-Florence), Rep. Mandy Powers Norrell (District 44-Lancaster), Rep. Bill Taylor (District 86-Aiken), and Rep. Anne Thayer (District 9-Anderson).

“Representative Tommy Pope and the bipartisan members of this ad hoc committee were individually selected because of their leadership abilities and knowledge of the tax system. I am confident that this diverse group will successfully begin laying the groundwork for significant tax reform,” Speaker Lucas concluded.

Will this group come up with something based on reason instead of which wheel squeaks the loudest? The odds have always been against it, but I’m going to allow myself to hope…

12 thoughts on “Could we finally get comprehensive tax reform?

  1. Lynn Teague

    We can hope –
    Doing away with Act 388
    Removing most of the sales tax exemptions
    Putting a sales tax on most services (personally I would exempt only medical)
    And on . . .

    1. Brad Warthen Post author


      Probably the biggest weakness in our revenue system right now is that we now rely too much on sales taxes — taxing goods, not services — as our economy has turned more and more to being about services. And even with goods, the Web has made it harder to collect the tax.

      After that, probably the biggest flaw is 388, and the fact that “businesses” pay a disproportionate share of property taxes. By “businesses,” I’m including rental property. Landlords of course pass on increased taxes to their tenants. So we have renters paying onerous taxes that homeowners do not pay. So it is that reality is the opposite of what Trumpian, Tea Party homeowners think — that “those people” who don’t own their homes “don’t pay taxes.”

  2. Karen Pearson

    The problem with these sales taxes is that while taken individually few, if any, would be onerous, when taken together they take a serious bite out of peoples’ budgets. And that causes a lot of problems with our poorer folk who would like to get school supplies and clothes for their children, and appropriate clothing for themselves. These taxes mean that they buy less, which means less business for local retailers, which means that they have less money to buy what they want. It becomes a downward spiral.

  3. Doug Ross

    Oooh, a committee!! Why didn’t anyone think of that before?

    Several states have no sales taxes. Several have no income tax. Some have neither. They all do better than South Carolina in every meaningful metric of performance.

    We don’t need tax reform, we need tax cuts.

    1. Brad Warthen Post author

      That attitude is EXACTLY the problem that has prevented us from getting a rational tax structure. All the participants are there just to cut taxes, to please this or that constituency.

      We haven’t had a serious effort to reform the tax system since 1994. That year a sweeping effort, which resulted from carefully studying the system overall, was completed. It was presented to the General Assembly, if I remember correctly, at the start of the 1995 session. But in the weeks between the 1994 election and the start of the session, Republicans had taken over the House (they almost did it in the election, then some post-election party switches gave them the majority). The study and its recommendations — the result of extensive work by people who knew what they were doing — was tossed in the trash. Because all the new crowd wanted to do with taxes was cut them. Because they were motivated by ideology, not by what made sense for the state.

      1. Brad Warthen Post author

        Actually, “ideology” isn’t really the right word. That gives too much intellectual heft to what I’m talking about. Basically, this was a crowd that saw themselves beholden to people who just didn’t like paying taxes — they particularly objected to paying property taxes to support schools — and they were determined to do something to please those people.

        1. Doug Ross

          I don’t mind paying taxes when they aren’t wasted. The half billion spent in Richland School District 2 on new buildings is a perfect example. All that money didn’t improve education one bit.

          Then there’s the Richland County Recreation Commission that takes a cut of my home and car property taxes. If I could opt out of that waste, I would.

          Will you guarantee that my tax burden will not go up in your new reformed system? If not, why should I pay more for the same thing? I already pay more than what I think it is worth. Oh, you want me to do that “because I can”? Well, save your time and just come and steal it from me instead.

          1. Kathryn Fenner

            I bet having school buildings to house the explosion of new students definitely beat the alternative: mobile classrooms?

  4. Doug Ross

    As soon as you start adding any exemptions to the sales tax, it becomes a political battle. A single flat tax with no exemptions is the right solution. But make it low – 3 or 4%. Then require a 2/3 vote to raise it.
    We are already taxed too much as it is. My personal tax burden when you add them all up is somewhere around 40%. It was even higher when I had my own business. That’s ridiculous.

    And few people understand all the hidden taxes paid by business travelers. Hotel taxes are typically 12-14%. Rental car taxes and fees are onerous. I had a one day car rental last week where the $51 of the $112 went to taxes and fees. In a typical travel week for me, I pay about $150 in taxes for airline fees and hotel taxes. For that, I suppose I get a fireman in case the hotel catches on fire.


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