That is the spoils system, after all: Those who win the spoils spoil what's left behind.
But Maddrey is thoughtful about his commentary and finds two notes to mine for optimism:
South Carolina’s tax system is unfair to taxpayers and inadequate to meet the basic needs of our state. These are two findings of the South Carolina Tax Realignment Commission (TRAC). The good news is that citizens can get involved to address this significant problem for our state and that overall tax rates can be lowered in the process.
Surely he's talking about North Carolina, where citizens can get involved to address their state's issues, because in South Carolina, citizen involvement is invited only if it supports the prevailing regime. Can you identify a single example of citizen involvement that led to the reversal of a program or practice favored by the legislative majority in the past decade? In the past two decades? Three?
As for overall tax rates being lowered: Isn't that the problem? Our lawmakers hear "responsibility" and start mau-mauing about interpretations and home rule; they hear "tax cuts" and stampede all over one another to sign up in front of the camera.
As stated in the TRAC final report issued this past December, South Carolina’s current tax structure is “significantly hindered by structural deficiencies that if not addressed will continue to negatively impact the state’s ability to produce stable revenues for even the most basic of government services and its ability to produce a system that is fair in its treatment of all taxpayers and not just an increasingly select few.”
I have to say that I appreciate Maddrey's -- and the TRAC commission's, for that matter -- sense of fair play. But the system that benefits "an increasingly a select few" is the South Carolina system. I think we own the patent on it, or the copyright. Our state flag might as well be that plan's trademark. From the era of colonial and early-state rule by Charleston's aristocratic elite, to the period of rule by manufacturing industrialists, to the period of iron-grip rule by the solipsistic demogogues, to the modern era wherein tax cuts define who's in the in-crowd, that "increasingly select few" has never been out of power. The only difference in South Carolina's whole spotted history has been the names at the top of the heap.
And that hasn't varied so much.
TRAC was established in 2009 by the South Carolina General Assembly to “undertake a thorough assessment of the state’s current tax structure to determine its ‘adequacy, fairness and efficiency’ to ensure the state remains an ‘optimum competitor in its efforts to attract business and individuals to locate, live and invest’ in South Carolina.”
The TRAC report points out that the current state tax system is not fair due to the large number of tax breaks enacted by the General Assembly. More than 80 items produced in the state are exempt from the state sales tax. The state annually exempts $2.7 billion in annual tax revenue while only collecting $2.5 billion.
This is tragic. We collect fewer dollars in tax revenue than the amount of dollars exempted by our elected leaders from taxation. Is this not the definition of corruption, doling out favors in state law depending solely upon who you are and how you can benefit the people in power? If so, where's SLED? Maybe we need another Operation Lost Trust, because a lot of South Carolinians have certainly lost trust in their government's competence and intentions.
In addition our state tax system has failed to keep up with the shift in personal consumption from goods to services. More than 60 percent of personal expenditures are now for services. Yet only 20 percent of services are taxed with little or no rationale as to why some are taxed and some are not.
I think everyone knows why some things don't get taxed. The best way to look at it is this: If you provide a service and your service is being taxed, it may be because you don't contribute to the right members of the legislature.
If only ignorance of the state's political system was tax-deductible...
As personal spending on services continues to increase as a percentage of the state’s economy, the negative impact on state revenues will continue to grow.
Another growth area is Internet purchases.
Our state has an inefficient and cumbersome system for collecting sales taxes on these items and suffers from low compliance. This lack of compliance harms local businesses whose sales are fully captured by our tax system.
Compliance is a matter of even application of law. Here again, as Bob Walker used to say, if the law isn't being applied evenly to everyone, it may as well not be a law; in this case, the law is merely a guideline, to be applied at the prerogative of those empowered to enforce it.
By eliminating many, if not most, of these tax exemptions and recognizing the growth of the service sector and Internet sales, overall tax rates can be reduced while still achieving the same amount of revenue.
Narrowing the tax base has resulted in a less stable system of state revenue. The drop in state revenue during the recent economic recession has been made much worse because of the narrowing of our base.
For example, Act 388, which eliminated school operation property taxes on owner-occupied, primary residences and added a penny to the sales tax, is currently costing state government approximately $100 million a year.
This lack of stability contributed to the 29 percent decrease in the state general fund budget in the last two years resulting in dramatic funding cuts for all types of essential government services. Public safety, services for the disabled, higher education, public education and all other services were forced to greatly diminish the extent and quality of what they do to improve the quality of life in South Carolina and our state’s ability to attract and create jobs.
Honestly, Maddrey's heart is in the right place. But is anyone surprised that our state government -- our General Assembly, in Columbia, governing the state of South Carolina -- laid plans that resulted in a 29 percent decrease in the state's general fund budget in the past two years? Come on. If the state's governing team during those years had been comprised of Harry Ott, Gilda Cobb-Hunter, James Smith, Joel Lourie and John Matthews, working with a governor named Tommy Moore, and their results were a 29 percent decrease in the general fund budget, I'd understand the surprise and shock. But it wasn't. Look at your inputs to get a sense of what outcomes to expect.
Long term our current tax system is unable to meet essential needs in the state. For example, the state budget for road maintenance is barely more than one-third of what is needed. According to the state Department of Transportation’s “State Program, Fiscal Year 2012” report, South Carolina needs $949 million in the coming year to achieve a “minimum acceptable” level of road maintenance. If that were accomplished, the state would need $765 million a year going forward to maintain this level. The General Assembly’s 2012 budget for road maintenance: $330 million, which is a 1 percent decrease from last year.
"Minimum acceptable" is our state motto. If it isn't, it should be.
To our state's Libertarian-leaning leadership team, we're going in exactly the right direction. Ultimately, their goal is to shift all functions now funded by the state treasury to the private sector, enable contractors to provide the services our citizens require, and allow the free market to govern what fails and what thrives.
The best tax system has a broad tax base, lower tax rates and a strong foundation of property, income and sales taxes (referred to as the “three-legged stool”). However, over the years the General Assembly has narrowed the tax base and created inequities in all three forms of taxation. This distorts economic decisions by businesses and consumers, leads to insufficient funding of essential services, harms the state’s ability to attract investment and spur job creation and results in higher tax rates.
Higher tax rates on some, Mr. Maddrey, only on some.
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