South Carolina, the QUEEN of BANKRUPTCY has an idea!!

Issue #21.30 :: 07/23/2008 - 07/29/2008
Wanted: New Tax “Entity”


Palmetto Institute, Key Lawmakers Push for Tax Study Group

BY BILL DAVIS


It’s turning into a perfect storm for Act 388, the state law passed by the General Assembly in 2006 that last year switched public K-12 education funding from private property tax revenues to a 1-cent increase in the state sales tax.

The economy is flagging. Property values are sinking. School districts across the state have been hit with tens of millions of dollars in shortages in the wake of the switch.

What to do?

The Palmetto Institute, founded by Lake City billionaire Darla Moore to improve the financial situation of every South Carolinian, has hit upon a plan for the state to avoid future gaffes. In April, the Institute released a study entitled “Selected Issues in South Carolina’s Tax and Education System.”
Among many recommendations, the study called for the creation of an independent, professionally staffed “entity” to review future changes in the state’s tax structure.
The review would do more than just calculate how much more or less the state would receive in revenues from changing the tax system, which is the purview of the Board of Economic Advisors. The new entity also would consider how changing the tax structure would affect the overall economy.

Moore this week spoke in Charleston, a quick commute from one of her million-dollar mansions, and shared with her well-heeled audience a message that would usually be anathema to a group of homeowners: All that money you’re saving on property taxes will end up costing you more money down the road.

Moore stumped that Act 388 unfairly and disproportionately shifted the education tax burden from homeowners to the business community and that would, in turn, result in a “chilling effect” on the state’s business climate. In the long run, business and industry would flourish or relocate here less, she argued, and taxes would go up for everyone across the board.

Without openly assigning blame, Moore, credited with being the “queen” of debtor-in-possession financing in the “greed is good” 1980s, pointed out that the state conducted no in-depth studies into how the switch would affect its economy.

Rep. Don Bowen, R-Anderson, said he would have shaken his head “no” had he been there. Bowen won his first House campaign in 2006 on the topic of the education switch being good for South Carolinians of every stripe — not just ones with Oprah-like net worth.

Bowen, in Columbia recently to attend a pro-switch conference, argued Moore didn’t have the perspective of state homeowners who “were really hurting because of the property taxes. She’s so rich, she doesn’t care if she has to pay more taxes.”

Not true, responded Palmetto Institute director James Fields, who agreed with Bowen, up to a point, that property taxes were hurting average Joes and Janes.

Fields responded that everyone in South Carolina will suffer more if the Legislature continues to make piecemeal tax changes. “All we are saying is that if they want to change the tax system, that’s fine,” he said. “But just don’t do it in such a way that it breaks the other parts of the economy.”

Moore said she would need big friends in the State House in the coming legislative session if the blue-ribbon entity were to have any political life.

Last year, the Senate, pushed by Sen. Hugh Leatherman, R-Florence, passed a bill that would create a similar panel. The bill died in the House, according to House Speaker Bobby Harrell, R-Charleston, because it came late in the session when there wasn’t enough time for the House to deal with it.

Both Leatherman and Harrell have vowed to make passing a similar bill a priority. Leatherman told Statehouse Report that he would pre-file legislation to create the entity and would move it through the Finance Committee, of which he is chairman, in January.
“The creation of a taxation realignment commission is one of the most important things the General Assembly will do this next session,” said the normally reticent Leatherman. “We must get a better handle on the interaction and interdependence of our revenue streams. For too long, we have approached tax decisions in a piecemeal fashion. The time for a comprehensive approach is past due.”

Crystal ball: Keep a close eye on Leatherman’s pre-filings, as how he would structure the commission differently from Moore and others could spell the difference between it being politically, or economically, viable.

Bill Davis is the editor of SC Statehouse Report; he can be reached at billdavis@statehousereport.com. Let us know what you think: Email news@free-times.com.