By Michael Fanning
South Carolina stands at a moment of crisis. Our state has the fourth-highest unemployment rate in the nation, at 11 percent. While the recession played a role, much of the blame lies with our convoluted and antiquated tax code, which promotes selected special interests, unfairly burdens the average taxpayer and discourages a competitive business environment.
Sleazy special-interest tax exemptions and loopholes are killing our state. With more than 80 sales tax exemptions and hundreds more service tax exemptions, we exempt more revenue than we collect — leaving our state broke, even as our sales tax rate ranks among the highest in the country.
A non-partisan report commissioned by the Legislature said we could lower our sales tax rate from 6 percent to 4.5 percent by removing some of these special interest exemptions — or to 3 percent by eliminating them all.
Act 388, which most legislators now agree was a mistake, shifted a property tax burden of hundreds of millions of dollars onto our business community. Meanwhile, the income tax rate is among the nation’s highest (higher even than Massachusetts), but special-interest exemptions and loopholes leave 41 percent paying no income taxes.
Over the past 22 months, a grassroots organization named ROAR (Reduce Our Awful Rates) has held more than 220 town hall meetings across the state. Everyone, from tea partiers to liberals, from businessmen to educators, sends the same message: We desperately need real, honest and comprehensive tax reform. Reform that (1) lowers overall tax rates, (2) restores the stability of South Carolina’s tax base (sales, income and property taxes) by eliminating unfair exemptions, (3) increases our state’s competitiveness, attracting businesses and promoting job growth, (4) creates a fair, honest and transparent code and (5) helps our state balance its budget while providing core services.
ROAR’s building momentum is forcing the hands of state policy makers. A House Republican study committee, a bipartisan Senate study committee and Gov. Nikki Haley are drafting plans to address the issue. Unfortunately, we all know the corrupting influence of special interests rarely allows our state government to function as it should. As the legislative session approaches, these groups are presenting their own disingenuous “reform” plans, benefitting themselves at the expense of the taxpayer.
But rarely do we get advance notice when special interests begin to cut their backroom deals with legislators. Recently, the S.C. School Boards Association presented a plan to increase taxes by $1 billion and further complicate our tax code — and called it tax reform. The plan mentions sales tax exemptions only in passing, ignores Act 388 entirely and leaves our income tax structure untouched and unjust. Our core services do need a stable revenue base, but this plan is no better than that of any of the other special interests: Each crafts special tax policies just for itself, ignoring the consequences on the state as a whole.
These are the tired old politics of division: Raise your taxes to pay for what we want — our special exemptions and our desired services. This selfish behavior is what got us into this tax mess.
These vested interests tell us they want change — if it benefits them. They call for reform — that includes more exemptions and higher taxes. South Carolinians of all walks of life and across the political spectrum demand real, honest tax reform. As the momentum builds, armies of moneyed lobbyists seek to divert it to their advantage.
South Carolina has the nation’s15th-highest sales tax, 13th-highest income tax for top earners, fifth-highest business property-tax assessments — but refuses to talk about the one thing that could unite us: reducing the billions of dollars in special-interest tax exemptions.
Reject these special-interest wolves in sheep’s clothing. Refuse to support any legislation that perpetuates a system benefiting the few at our expense. Let this moment of real crisis become a moment of real change. Stand united. Start ROARing.
Dr. Fanning, who has served the past 14 years as executive director of the Olde English Consortium in Chester, is the founder of the grassroots organization Reduce Our Awful Tax Rates. Contact him at FanningROAR@gmail.com.