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Over the past few decades, the special interest-driven process of collecting taxes and fees in South Carolina has been studied literally dozens of times. I know because I read all of these reports while serving as chief of staff to S.C. Gov. Mark Sanford. There have been several recommendations offered by a variety of experts to comprehensively reform our tax code – all of which have been ignored by a legislature fearful of angering the special interests that benefit from the loopholes and exemptions carved out by their lobbyists.
So what we get in South Carolina is random tax policy the lurches forward in fits and starts, dictated by what a majority of lawmakers in any given year perceive to be helpful to their reelection. And we never get reform that encourages the private investment of capital that leads to higher income levels and the creation of new jobs.
Recently, yet another bill was filed in the state Senate that would create yet another commission composed of non-elected officials to make recommendations to the state tax code. But this bill comes with a twist: it not only would form a commission (referred to as the “Tax Realignment Commission,” or “TRAC”), it would require the legislature to either adopt or reject the TRAC proposal with a single “up or down” vote.
There would be no committee process, no legislative input and zero debate.
This TRAC approach sets a dangerous precedent. As elected officials, we cannot evade our responsibility and leave the work — and major decisions — to an unelected group of a few individuals.
I know what my constituents want because they’ve told me. They think that having hundreds of special sales tax exemptions – to powerful groups like newspaper publishers, tobacco companies, television stations and the solid waste industry – is unfair. And they think paying for that tax folly by having the highest top marginal income tax rate in the Southeast is absurd.
I agree, and I am prepared to incur the wrath of the industries with special perks by voting to close their loopholes (which represent $2.7 billion in special tax breaks annually) because their elimination would allow for a reduction in everyone’s income taxes. Not just the politically well-connected, everyone.
As stated, my premise is that elected officials ought to be the ones who set our state’s tax policy.
I don’t trust a non-elected commission appointed by a few powerful lawmakers to represent my constituents’ interests. But even those who don’t accept that basic democratic premise should still reject the TRAC approach. Here’s why:
First, TRAC forbids consideration of Act 388 – the controversial tax swap lawmakers passed two years ago. Ask Realtors, for example, about how its “point of sale” provision has affected land sales. Or ask the businesses who have seen crushing increases in their property taxes. Putting Act 388 off limits makes no sense.
Second, any meaningful look at how our state raises revenue is incomplete unless it also simultaneously addresses how much we ought to be spending.
Both sides of the coin must be considered, and TRAC focuses only on the first.
The current budget crisis is forcing legislators to take a hard look at all government programs, and the forced discipline of making tough spending choices should not be compromised by a commission that could very likely result in the creation of new revenue sources at the already over-burdened taxpayers’ expense.
At the very least, TRAC should stipulate that whatever the commission recommends for the “up or down” vote by the legislature, the overall revenues to the state should not increase so that more earnings can remain in the private sector where real economic growth occurs.
But at the end of the day, the primary reason for rejecting the TRAC approach is because it is an abdication of legislative responsibility. We cannot simply give up on our job because it is politically disadvantageous.
