The name of our modest little website suggests that we promote conservative ideas. Even dumb liberals can figure that one out.
Just because a politician calls a proposal “conservative” doesn’t necessarily mean that it is. For example, the legislature in 2006 passed Act 388, which shifted the tax structure for school funding from local property taxes to a statewide penny increase in the sales tax.
The motive for attacking this problem was laudable. In some parts of the state, reassessment sent property taxes soaring. The legislature essentially was trying to fix problems created by local bureaucrats and slap stupid council people.
But there are serious unintended consequences of the legislation. Legislators said it was a conservative move. But was it? Independent studies suggest that businesses are taking it on the chin. In fact, this year alone business will shoulder an additional $250 million in sales taxes… $409 million by the end of next year. What’s conservative about shifting the tax load to businesses?
That’s the kind of tax policy you’d expect from Obama.
Economics 101 says that every dollar business carries in additional costs eventually makes its way down to the consumer. Just look at the effects of gas prices on trucking, shipping, the cost of food, and extra baggage fees for airlines.
The South Carolina Policy Council, in a recent study of the Act 388 “tax swap” by the Beacon Hill Institute, noted that the additional tax burden on business will stifle the creation of nearly 6,600 new jobs and $852 million in investments over the next two years, while personal income will fall by $321 million and real disposable income per capita by $79 by 2010.
A stable tax system must have the broadest base of taxable entities, each with the lowest rates possible. According to that philosophy, Act 388 may not have been the best move for tax reform in SC.
The Palmetto Institute, an independent research foundation in Columbia, proposes creation of a broad-based, independent tax study commission to review the state’s tax structure top to bottom.
Had an independent tax study group been in place, it could have not only looked at the short-term economic impact of Act 388, but also look at long-term budget forecasting for the state.
As the Palmetto Institute puts it…
Armed with sufficient research pointing out potential consequences for the changes being considered, the elected officials could at least approach the need for reasonable tax reform in an enlightened manner. Otherwise, real tax “reform” is nothing more than an illusion.
The SC Policy Council drove home the importance of a “dynamic” perspective on the tax structure in our state.
A static analysis simply looks at the immediate revenue impact to government, without examining the inevitable changes in the private sector as a result of either a tax increase or decrease…. [T]ax swaps ultimately lead to higher taxes, fewer jobs and less money for investment.
South Carolina’s local and state tax laws are a mess. They’ve been cobbled together over many decades, usually with the most powerful lobbying interests prevailing. Many of the tax laws were enacted when manufacturing ruled and our biggest competitors for jobs were Georgia and North Carolina.
Today we compete globally in the knowledge-based economy. Our tax laws should reflect modern-day reality. The idea of an independent tax commission to recommend to the legislature such a tax structure should get serious consideration next year.