SC deserves new voting machines

By Becci Robbins
SC Progressive Network Communications Director

A SC Legislative Audit Council report released March 27 on the state’s voting machines found serious glitches. “Problems with iVotronic machines that have been reported in elections in other states include vote flipping, candidates missing from screens, lost votes or too many votes, freezing, and batteries,” the report found.

The report didn’t mention that many of those states have quit using the iVotronics, which are no longer being manufactured. While these same problems have been widely observed in South Carolina, every precinct still uses them.”63% of the counties that had problems with the machines have not reported the problems to the State Election Commission (SEC),” the study reported, and recommended the SEC establish a hotline to track problems with the machines.

The SC Progressive Network has helped run a statewide election day hotline, 866-OUR-VOTE, in every general election since 2004. Network Director Brett Bursey said, “In the last general election, while all the news was focused on long lines in Richland County, we had calls from five other counties about machine problems causing hours-long waits to vote.”

EP-sign“The SEC has not gathered information about the increasing unreliability of these machines, which are reaching the end of their projected 10-year-lifespan,” Bursey said, and we welcome the LAC report as the start of a serious discussion about what our new voting system should look like.”The Network opposed the purchase of the iVotronic machines in 2004, in part, due to their inability to produce a voter-verified paper ballot that could be used to call a close race. The LAC report concluded, “The audit process in South Carolina is limited by the absence of a voter-verified paper audit trail (VVPAT).” The LAC determined that a VVPAT could be added to the existing machines for $17.3 million.

The 2013 House budget includes $5 million that the SEC has requested to begin saving for a new system after 2016.

“Rather than consider patching up these machines, or buying more used ones as Richland County is planning, we need to be looking at better and cheaper ways to vote — well before 2016,” Bursey said.

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The Network has long advocated a voter-verifiable voting system like the one Clemson has devised.

Dr. Juan Gilbert, Chair of the Clemson School of Computing, Human-Centered Computing Division, has been doing research and development on electronic voting systems since 2003. He got a $4 million grant from the federal Election Assistance Commission (EAC) several years ago to develop a better voting system. The EAC sets standards for voting machines, and has never approved the system currently used in South Carolina.

Gilbert’s “Prime III” meets federal requirements, and was used in a state election for the first time in January in Oregon. Prime III runs on open-source software, on machines available at any computer store. It’s simple, cheap, reliable, produces a voter-verified-paper ballot, and can be publicly owned. The privately owned system we now use costs $1million in annual licensing fees, more on tech support, and runs on secret codes.

“We see no legal impediments to using a system like Clemson has developed, and tremendous advantages,” Bursey said. “Clemson can provide the software, our technical schools can train technicians, and a whole new statewide system would cost little more than adding a paper trail to our old machines.”

Jim DeMint, why should taxpayers fund special election?

Dear Mr. DeMint,

We are writing to ask you to help pay for the election to replace you in the Senate. The South Carolina Election Commission estimates that the special election required by your resignation will cost South Carolina taxpayers about $1 million.

According to the Federal Election Commission, your Senatorial political action committee has $800,409 “cash on hand” and no outstanding debts (Team DeMint FEC ID S4SC00083, most recent filing 9/30/2012).

In 2010, your PAC gave a total of $1,150,000 to Republican parties in eight states other than South Carolina. That year you made a total of $7,500 in contributions to 19 South Carolina county Republican parties.

In 2012, you generously donated $700,000 to the Club for Growth and $5,000 to the SC Republican Party.

Your new million-dollar-a-year job at the Heritage Foundation affords you the opportunity to donate the remaining $800,409 in your campaign account to the SC Election Commission, removing that burden from South Carolina taxpayers.

According to FEC staff, your check to the SC Election Commission to pay for an election you necessitated would qualify as a “public purpose” as required by statute.

Your resignation from the Senate, and Congressman Tim Scott’s resulting appointment to your seat, will cost South Carolina taxpayers $1 million to pay for a special election.

We hope that you agree that paying for this election with campaign money you no longer need would honor both your constituents and your conservative values.

Regards,

Brett Bursey
Director, SC Progressive Network

Is Bomb Plant top threat in US?

At a 1978 SC State House press conference organized by the Natural Guard (the SC Progressive Network’s predecessor), Dr. John Goffman, a nuclear scientist credited with the discovery of plutonium, stated that the Savannah River Bomb Plant was the nation’s greatest national security threat. In the ensuing 34 years, the threat has increased.

The Bomb Plant: America’s Three A.M. Nightmare

November 14, 2012

National Security News Service

Aiken, S.C. – Tons of weapons grade plutonium and other nuclear materials, a target for terrorists, are not being properly protected by the National Nuclear Security Administration at the Department of Energy’s sprawling Savannah River Site, according to security consultants and U.S. counterintelligence officials.

A secret security review underway at DOE and other government agencies after an elderly nun last summer breached a NNSA bomb-grade-uranium facility at the Oak Ridge Tennessee Y12 area reveals “harrowing problems in site management and control at other DOE sites,” said a Homeland Security official who requested anonymity. The official said that the Savannah River Site was of concern because “SRS does not have the staffing or the facilities to protect the huge amounts of plutonium that have been brought to SRS in recent years.”

Read more here.

SC Election Day meltdown: a cautionary tale

By Brett Bursey
Director, SC Progressive Network

The Election Protection hotline started ringing shortly after the polls opened at 7. It didn’t stop all day. Ninety percent of the touch-screen voting machines in the county’s 118 precincts wouldn’t boot up. Some precincts didn’t have working machines until 5:30pm.

One campaign tried to get the court to extend voting hours, but failed. The SC Republican Party Chairman said, “There is always a backup in case there is an election machine malfunction.” But unfortunately for thousands of voters, there was no such backup.

This wasn’t Richland County on Nov. 6, 2012. It was in Horry County’s 2008 Republican presidential primary.

At the time, I thought this was the train wreck we needed to get out from under these unreliable voting machines and get our emergency ballot statute fixed. I was wrong.

Four years later, it was thousands of voters in Richland County standing in line for up to seven hours because there weren’t enough working machines and no emergency ballots.

These are the same machines that failed in Horry County in 2008. The same machines that gave the 2010 Democratic nomination for US Senate to the virtually unknown Alvin Green, a result deemed statistically impossible by the nation’s top computer voting experts. The same machines South Carolina bought between 2004 and 2006 – against our organization’s recommendation to the Election Commission. After studying the issue extensively and watching what was working in other states, we advocated simpler, paper-based voting devices.

This Election Day, machine failures didn’t happen in Richland County alone, but in at least seven other counties, according to reports to the Election Protection hotline. Callers from Spartanburg, Greenville, Charleston, Horry, Berkeley, Kershaw and Sumter counties all reported machine failures causing long lines.

In the 2008 Horry machine failure, State Election Commission spokesman Gary Baum said all precincts must have emergency paper ballots on hand, calling them “part of the election.”

SEC spokesman Chris Whitmire said voters could use almost anything – “a napkin, a paper towel” – to vote.

That afternoon, Whitmire called and said, “Brett, let’s read that statute together, out loud.” He was referring to State Code 7-13-430 that used to require each precinct to have enough paper emergency ballots on hand “as are equal to ten percent of the registered qualified voters at such voting place.”

We discovered that, in 2000, the emergency ballot statute was amended to require “a number of ballots not to exceed ten percent of the registered qualified voters at the voting place.” The math we had learned in our minimally adequate schools allowed us to calculate that zero does not exceed 10 percent. So, while precincts are required to provide emergency ballots, they are not required to have any until after the emergency.

Sen. Phil Leventis requested an opinion from Attorney General Henry McMaster prior to the 2008 general election on the contradictory nature of the redrawn statute. McMaster agreed that while precincts were not required to have emergency ballots on hand, they are required to be available “without undue delay.”

In the 2008, deputy sheriffs waited for the county election office to print the various versions of ballots required by local races, and then drove paper ballots to the precincts. At 2pm, deputies were still delivering the first shipments of paper to some precincts.

Whether you consider it “undue delay” might depend on whether you were one of the thousands of Horry County voters who braved freezing rain only to be told to come back later.

In Richland County, with countywide reports of machine shortages and failures, only a few precincts considered offering emergency ballots. Our Election Protection Coalition provided emergency ballots for one precinct. Other precincts that requested them were told by county election officials they couldn’t use emergency ballots.

Richland County Election Board Chair Liz Crum said they were prohibited by law from using emergency ballots. It says “if no machine is available,” paper shall be provided. Most precincts had some machines working.

Clearly, the statute needs to be fixed to require an on-hand supply of paper ballots and specify the wait times at which point they may be used.

The requirement for emergency paper ballots to be on hand at precincts was written out of the law in 2000 at the insistence of the Association of Counties. At the time, counties were using lever machines, punch cards and mechanical devices that never failed county-wide. The counties argued that emergency paper ballots were an unnecessary expense.

In 2002, in the wake of the Florida “hanging chad” debacle, Congress passed the Help America Vote Act, which provided funding for states to update their voting systems. South Carolina was the first state to spend the money, and one of seven states not to seek an extension of the funding deadline pending the establishment of federal guidelines for the new generation of touch-screen voting computers.

The SC Progressive Network presented expert testimony to the state Election Commission about the devices’ shortcomings before the state spent $38 million to buy the iVotronic machines we still use. The “iVo’s” don’t produce a paper record that can be verified by the voter, or used to recount the vote, and have been de-certified in a number of states because they are unreliable.

Switching to a statewide, computer-based, paperless voting system should have caused the legislature to restore the requirement for emergency paper ballots at every precinct. The potential for county-wide machine failures is a proven liability of this kind of system.

While blame for the failure in Richland County is falling largely on election officials, ignoring the history of failed machines in this and other elections implies that only human ineptitude or malfeasance can cause such problems.

As these delicate and complicated devices reach the end of their lifespan, we should be concerned about future elections and our next generation of machines. Replacing the people that run the machines will not solve the core problem. We must learn from our past mistakes and acquire a more a reliable, rnon-proprietary, paper-based voting system.

Brett Bursey is SC Progressive Network Director and SC Election Protection Field Coordinator.

Speaker Harrell’s PAC donated $30,000 to members of House Republican Ethics Committee

The SC Progressive Network submitted these written comments to the Republican Caucus Ethics Committee, which met this morning.

Money — rather than good ideas — fuels South Carolina’s politics. Ninety percent of the candidates who spend the most money win. An incumbent who spends the most money has a 98 percent chance of being elected. While state ethics laws limit campaign contributions to House races at $1000, a proliferation of political action committees (PACs) allow deep-pocket donors to get around the limit.

Webster’s defines ethics as “the principles of conduct governing an individual or a group.” We urge this committee to consider that while the House rules of conduct, when followed, may be legal, they are not necessarily ethical.

For example, the Palmetto Leadership Council is a PAC headed by the SC House Speaker Bobby Harrell. Membership in his Leadership PAC cost $3,500. Harrell says on the PAC’s web site, “We are building a unique coalition between leaders in the private sector and those of us engaged in public service.”

While Harrell, or a corporation like AT&T, can only make a $1000 donation to a House candidate, AT&T can make a $3,500 donation to Harrell’s Leadership PAC, which can then make another $1,000 donation to the same candidate.

Harrell’s PAC has raised nearly $1 million since its founding in 2004, with 98.7 percent going to Republican candidates (79 percent incumbents). More than 89 percent of the candidates backed by Harrell’s PAC won election.

Harrell’s largest donations were $100,000 checks written to the state Republican Party. The party can then make a $5,000 contribution to the same candidate that received the $1,000 maximum from Harrell’s PAC.

It’s a way around campaign finance laws. It’s legal but ethically suspect. We urge the Committee to follow the Senate’s lead and eliminate leadership PAC’s that allow the “bundling” of campaign donations that violate the spirit of campaign finance laws.

Donations from Palmetto Leadership Council to members of the Republican Caucus Ethics Committee:

Chairman Murrell Smith, R-Sumter
(803) 734-3042 MurrellSmith@schouse.gov
$5000 (2004-2012)

Rep. Rita Allison, R-Lyman
(803) 212-6788 RitaAllison@schouse.gov
$3000 (2008-2012)

Rep. Derham Cole, R-Spartanburg
(803) 212-6790 DerhamCole@schouse.gov
$3000 (2008-2012)

Rep. Joe Daning, R-Goose Creek
(803) 734-2951 JoeDaning@schouse.gov
$3000 (2008-2012)

Rep. Phyllis Henderson, R-Greer
(803) 212-6883 PhyllisHenderson@schouse.gov
$1000 (2012)

Rep. Jenny Horne, R-Dorchester
(803) 212-6871 JennyHorne@schouse.gov
$3000 (2008-2012)

Rep. Andy Patrick, R-Hilton Head
(803) 212-6928 AndyPatrick@schouse.gov
$2000 (2010-2012)

Rep. Tommy Pope, R-York
(803) 212-6895 TommyPope@schouse.gov
$2000 (2010-2012)

Rep. Rick Quinn, R-Lexington
(803) 212-6897 RickQuinn@schouse.gov
$3000 (2004-2012)

Rep. Roland Smith, R-Warrenville
(803) 734-3114 RolandSmith@schouse.gov
$5000 (2004-2012)

TOTAL: $30,000

Court rules that SC voter ID law does not, in fact, require photo ID

By Becci Robbins
SC Progressive Network Communications Director

Following the federal court ruling that approved a substantially modified version of South Carolina’s voter ID law, SC Progressive Network Director Brett Bursey called the venture “very expensive theater.”

The ruling begins by noting “South Carolina’s new (photo ID) law…does not require a photo ID to vote.”

While Gov. Nikki Haley crowed, “This is not just a win for South Carolina, this is a win for our country,” and state Attorney General Alan Wilson hailed the ruling as a vindication of Republican state legislators, the law the court approved is not the one that went to Washington.

District Court Judge Bates said in his opinion, “Act 54 as now pre-cleared is not the Act 54 that was enacted in May 2011,” when signed by Gov. Haley.

While the Court acknowledged “an absence of recorded incidents of in-person voter fraud in South Carolina,” it found that “preventing voter fraud and increasing electoral confidence are legitimate” reasons for the law.

“After several years of divisive and racially charged debate on this unnecessary law,” Bursey said, “after $2 million in taxpayer money spent defending it, and several million more dollars to implement it, our photo ID law will not require voters to have a photo ID to vote.”

The original law allowed a voter to claim a “reasonable impediment” to not having a photo ID, and left it to the county board of elections to determine whether the reason was legitimate. Today’s ruling said that the reason for not having a photo ID “is to be determined by the individual voter, not the poll manager or county board. So long as the reason given by the voter is not a lie, an individual voter may express any one of of the many conceivable reasons why he or she has not obtained a photo ID…voters with the non-photo voter registration card…may still vote without a photo ID.”

Judge Baker wrote, “It is understandable that the [Dept. of Justice] and the intervenors [including the SC Progressive Network] in this case, would raise serious concerns about South Carolina’s voter photo ID law as it then stood.”

The governor’s victory dance notwithstanding, Judge Baker concluded, “One cannot doubt the vital function that Section 5 of the Voting Rights Act has played here. Without the review process under the voting Rights Act South Carolina’s voter photo ID law certainly would have been more restrictive.”

Calling it political theater, Bursey said, “The grandstanding on this issue by the governor and the Republican majority of the legislature comes at a very real cost to taxpayers, voters and election workers. It is partisan politics at its worst.”

The law will go into effect in 2013.

Delores Freelon has been jumping through hoops for more than a year trying to obtain a SC photo ID. In August, she testified in front of the three-judge panel in Washington, DC.

The South faces growing school segregation

By Sue Sturgis
Institute for Southern Studies

Despite declining residential segregation for black families in the United States, school segregation for black students remains very high — and it is increasing most dramatically in the South, which has led the nation in desegregation thanks to the victories of the civil rights movement.

Those are among the findings of research released last week by the Los Angeles-based Civil Rights Project, which found persistent and serious increases in segregation of public-school students by race and poverty. The changes are most dramatic in the South and the West, where youth of color now constitute a majority of public school students.

“These trends threaten the nation’s success as a multiracial society,” says project co-director Gary Orfield.

The project released three separate studies looking at school segregation in the nation overall and in the South and West specifically. Among the key findings for the South:

  • The South is a majority-minority region in terms of school enrollment, second only to the West as the nation’s most diverse, with whites making up 46.9 percent of the South’s students.
  • Latino students account for almost the same share of the South’s school enrollment (23.4 percent) as black students (25.9 percent).
  • In 1980, just 23 percent of black students in the South attended intensely segregated schools, defined as those with 90 to 100 percent minority students. By 2009-2010, that number had risen to 33.4 percent — close to the national figure of 38.1 percent.
  • The share of Latino students attending intensely segregated minority schools has increased steadily over the past four decades, from 33.7 percent in 1968 to 43.1 percent in 2009. Today more than two out of five Latino students in the South attend intensely segregated schools.
  • Black students experience the highest levels of exposure to poverty in nearly every Southern state, while in the rest of the United States Latino students experience higher exposure to poverty.

The report also looks at racial segregation in schools in the South’s metro areas. It found that black students in the Raleigh, N.C. area had the highest exposure to white students, though that exposure is on the decline due to the ending of a longstanding socioeconomic diversity policy by the previous school board’s Republican majority (for more on that, click here). Tampa, Fla. and Memphis, Tenn. have experienced sharp increases in school segregation, while black-white exposure in schools is on the rise in two places where it has historically been lowest: Birmingham, Ala. and New Orleans.

The researchers offer several South-specific recommendations to reverse the troubling trends, including continued or new court oversight of the region’s school districts, the development and enforcement of comprehensive post-unitary plans, and making a strong commitment to pursuing voluntary integration policies.

The Civil Rights Project is also concerned that the issue of school segregation is not getting attention in the current presidential election.

“We are disappointed to have heard nothing in the campaign about this issue from neither President Obama, who is the product of excellent integrated schools and colleges, nor from Governor Romney, whose father gave up his job in the Nixon Cabinet because of his fight for fair housing, which directly impacts school make-up,” Orfield says.

A supporter of the civil rights movement, George Romney was named secretary of the Department of Housing and Urban Development by President Nixon and proposed an ambitious housing program to promote desegregation. But his plan was met with hostile reactions from local communities and a lack of support from Nixon, who pressured Romney to resign.

Photo ID law: the numbers underscore its uselessness

A rough estimate using figures from the recent Carnegie-Knight Foundation’s study of voter fraud indicates that the South Carolina photo voter ID law will prevent one in-person election fraud every 68 years.

10 cases in last 6 election cycles nation wide.
145 million registered US voters
= one fraudster per 85 million possible votes.

If every one of South Carolina’s 2.5 million voters are required to show a photo ID when they vote, over the next 68 years (34 election cycles) we will catch one fraudster impersonating someone at the polls.

According to the National Weather Service, during the time it will take to catch one vote fraudster, 85 South Carolina voters will be struck by lightning.

South Carolina is in the process of spending $1.5 million on private attorneys to overturn the Dept. of Justice ruling that our photo voter ID law violates the Voting Rights Act. The case is scheduled to be heard in DC federal court beginning Aug. 27.

Read the Washington Post story on the report.

Something to Celebrate

By SC Rep. Gilda Cobb Hunter

Chief Justice John Roberts is to be commended for the courage and leadership he showed in the historic recent ruling by the US Supreme Court. The decision upholding the Affordable Care Act was a fitting tribute and wonderful gift for America’s 236th birthday.

If only Gov. Nikki Haley, Attorney General Alan Wilson, and others in positions of leadership saw it the same way. Their insistence on continuing to spend time and our state’s limited resources fighting for the sake of fighting is a waste of taxpayer money.

What happened to this notion of the rule of law and respect for the process? Does that apply only when we agree, otherwise we are free to take our ball and go home? The Supreme Court is the final arbiter, accept it and move on. To do otherwise shows more interest in scoring political points on the national stage than truly addressing the needs of nearly one million South Carolinians who are without health care insurance.

The core argument is that the state should decide what the best plan to provide coverage to 900,000-plus uninsured South Carolinians looks like. Rep. Harold Mitchell and I introduced legislation last year that would have given South Carolina an opportunity to do just that. Our bill created health exchanges, new marketplaces starting in 2014 that will allow individuals and small businesses to compare and choose private health plans.

The passage of the Affordable Care Act included funds for states to plan for a state-based solution for providing health care coverage for the uninsured. South Carolina accepted $1 million from the federal government as a planning grant, while Gov. Haley developed a plan to opt out.

So where is the plan; how will it provide coverage; how many will be covered; during what time period; at what cost to taxpayers; and what steps are in place to implement it? These are reasonable questions since we are refusing to expand Medicaid to 133% of poverty, as 43 other states have done.

Understanding the Affordable Care Act requires accurate information. A lot of South Carolinians who stand to benefit most have decided they don’t support the law. They would be wise to considerer the facts:

  • Insurance companies no longer have unchecked power to cancel your policy, deny your child coverage due to a pre-existing condition or charge women more than men.
  • Coverage of preventive care free of charge like mammograms for women and wellness visits for seniors.
  • 5.3 million Seniors and people with disabilities have already been helped to save an average of over $600 on prescription drugs in the “donut hole” in Medicare coverage.
  • Children up to 26 years of age can stay on parent’s policy.
  • The federal government for three years pays 100% of the costs to expand Medicaid to cover more uninsured. After the third year the federal portion of the tab is 90% and 10% to the state.

The fig leaf opponents have grabbed from the Supreme Court’s decision is the tax label. The fact is the tax will apply to less than 1% of irresponsible Americans who can afford insurance but refuse to buy it passing their cost of care on to the rest of us.

Enough already! Empty rhetoric and name calling might score political points with certain base voters, but it does nothing to get uninsured South Carolinians adequate coverage.

Piñata Politics Just Tempest in a Tea Party Pot

By Becci Robbins

Talk about falling down the rabbit hole. At this time last week I was making a gift for my friend Donna Dewitt to celebrate her retirement from the SC AFL-CIO. And what says party like a piñata?

Yes, the piñata was my idea. I made it. I filled it with candy and Bobby Bucks. I videotaped its predictable demise. I sent the clip to friends to amuse them in these most un-amusing times. Who knew it would go viral?

The breathless response has been over the top, a sad commentary on the echo chamber that is the Internet.

Was the piñata in poor taste? Yes. Was it malicious? No. Am I sorry it caused some people to lose their minds? That’s their problem.

My only regret is having put a dear friend in the position of having to defend a piñata she did not know about or ask for. Donna works harder at a thankless job than anyone I know. She doesn’t deserve the heat she’s taken, including death threats and a promise from Gov. Nikki Haley on national TV to “continue beating up on unions.”

To fixate on unions instead of dealing with the critical problems we’re facing is to use the tired politics of distraction. I should have expected it from the governor, whose favorite posture is that of victim – first of racism, then sexism, now union thugs.

While Haley has made an odd habit of union-bashing, for me she crossed the line when she used her last State of the State address to proclaim: “Unions are not needed, wanted or welcome in South Carolina.” Instead of a message to unite all of us who call the Palmetto State home, she served up a campaign speech of red meat. It was inappropriate. And insulting.

When the governor bashes unions, she’s bashing my colleagues. She’s bashing my friends. She’s bashing my family. She’s bashing me. So forgive me for taking it personally, but I’ve had enough.

The piñata was intended as comic relief among friends after a long day of talking about the state budget, our election system and workers’ rights at the SC Progressive Network‘s annual spring conference. The party was a chance to unwind and honor Donna, our longtime co-chair. For the governor to use the incident for political gain is predictable but unfair, and more than a little ironic.

After all, Donna didn’t do anything as shameful as cut funding for education and mental health services. She didn’t gut environmental regulations or stack boards with corporate cronies. She didn’t show contempt to the Supreme Court. She didn’t campaign on a promise of transparency and then routinely sanitize her paper trail. She didn’t lobby for a corporation while being on their payroll. She didn’t use her power like a bludgeon.

Donna smacked a piñata. Which is, good people, what happens to piñatas. I made one of a Corporate Fat Cat for John Spratt’s retirement party, and it, too, got smashed. Why didn’t it go viral? Because nobody could make political hay out of it.

And that’s exactly what the governor is doing. Yesterday I got an email solicitation from her office inviting me to watch the video and contribute $250 to fight “Big Labor.” The email mentions President Obama twice. Talk about tasteless.

The governor will get no apology from me. But I offer one to Donna for putting her in an awful position. She could have risked hurting my feelings by refusing to play along at the party. Or she could have thrown me under the bus when she started catching heat. She did neither. As a labor leader, she knows something the governor doesn’t: solidarity matters most when it’s inconvenient.

Sorry if this flap has embarrassed any of our members. Please know that Donna and Network Director Brett Bursey have made the best of the rare media attention. (Watch Brett on Fox and Donna on CNN, for starters.)

It may not be pretty, but at least people are talking about organized labor in South Carolina. It’s a conversation that’s long overdue, and it’s up to us to keep it honest.

Becci Robbins is SC Progressive Network Communications Director. Reach her at becci@scpronet.com.

Is South Carolina broke or morally bankrupt?

By Sen. Phil Leventis
Sumter, SC

With my legislative tenure coming to an end, I want to share something with my fellow South Carolinians. Our state is not broke, but we are teetering on the verge of moral bankruptcy in our failure to meet the needs of our citizens. That’s why I have introduced the TRAC Recommendation Act (S.1454) that eliminates or reduces many sales-tax exemptions. The nearly $1 billion this act will raise annually would be used to pay for education and local governments, which continue to be shorted due to lack of revenue.

During my 32 years as a legislator, I have been guided by the principle that government should invest in meeting the needs and aspirations of its citizens. This principle has been undermined by an ideology claiming that government is the cause of our problems and, accordingly, must be starved.

The real source of our problems is a government unwilling to invest tax dollars in itself and its citizens. When businesses strive to be competitive, they invest in their future. That is what we have to do today in South Carolina to ensure a more prosperous future.

We’re not broke. The problem is that narrow political ideology has trumped statesmanship. The lack of political will to fairly reform our tax code to meet our basic civic contracts for education and infrastructure leads our citizens to believe that “minimally adequate” is the best we can hope for.

In 2010, the Tax Realignment Commission (TRAC) was created to review the state’s tax code and recommend changes “designed to ensure that the state’s tax structure is balanced so that the system is adequate, equitable, and efficient.” The TRAC commissioners and staff did a thorough job of reviewing tax loopholes and inequities, and recommended reforms of sales-tax exemptions that could raise close to $1 billion the first year.

Sadly, ideology trumped common sense, and the Republican-created and -appointed commission’s goal was to use any new revenue to further reduce taxes and increase corporate subsidies, not pay our bills.

Our state’s fixation on being business-friendly is reflected in the Forbes ranking that puts South Carolina fifth in its “business friendly regulatory environment” but 44th in quality of life. Forbes ranks the quality of our labor supply at 22nd, far behind North Carolina (third) and Georgia (fourth). The message this sends is that South Carolina, with its lax regulations and unskilled labor force, is a cheap place to do business — but you might not want to live here.

To put the anti-tax ideology in perspective, consider that of all the industrialized nations, only Turkey and Mexico have a lower individual tax burden than the United States, according to the Organization for Economic Cooperation and Development. The anti-tax National Tax Foundation ranks South Carolina 43rd among the 50 states in taxes as a percentage of income, and dead last in per capita state and local taxes. You begin to wonder why we need to further reduce taxes when we can’t pay our bills.

The House’s budget cuts mandatory funding for education by $665 million and local government funds by $71 million and robs $118 million from the general fund to cover the sales-tax shortfall of Act 388’s property-tax swap. These spending levels are set by law, but education and local government funding obligations are ignored annually by budget provisos because of a presumed lack of revenue and a clear shortage of political courage. These cuts mean larger classes, fewer teachers, police and firefighters and deteriorating infrastructure, all of which combine to make our state less competitive.

The TRAC recommendations on sales taxes would raise nearly $1 billion next year and more in coming years. This is what we need to meet these mandatory spending requirements, and more comprehensive tax reforms would meet and exceed them for years to come.

I’m sponsoring this bill because there is no real legislative debate — and little public understanding — about how we could raise the revenue to pay our bills with fair and broad tax reforms while also improving our quality of life and strengthening our economy.

The critical debate I hope to spark is whether the role of our government is shaped by the special-interest groups who make the majority of campaign contributions, or by the citizens who pay the taxes. I believe that citizens are willing to pay fair and equitable taxes when they get their money’s worth. It’s called democracy, and it’s past time for South Carolinians to reclaim it.

Sen. Leventis is a Sumter businessman; contact him at philleventis@scsenate.gov.

Report: $70 million in SC workers’ taxes diverted yearly to pay corporate subsidies

Nearly $700 million a year in state income taxes withheld from worker paychecks in 16 states is being used to provide lavish subsidies to corporations rather than paying for vital public services. These diversions have gone to more than 2,700 companies, including major firms such as Sears, Goldman Sachs and General Electric. Few, if any, of the affected workers are aware, because no state requires they be informed on their pay stubs.

South Carolina’s Job Development Credits cost $70.3 million per year, the fourth-costliest diversion among the states. “Putting aside the question of this being a good investment of tax dollars, the immediate problem is a lack of transparency,” said Dr. Hoyt Wheeler, Co-chair of the SC Progressive Network.” Wheeler, a retired business professor, noted that the SC Department of Revenue does not reveal the credit amounts the 221 companies receive, or require the workers to be notified that their employer is pocketing their state income tax. “Individual workers at some of these companies can be donating as much as $1.25 an hour for years to the corporate bottom line, while thinking they are helping pay for schools and infrastructure,” Wheeler said.

These are the key findings of Paying Taxes to the Boss: How a Growing Number of States Subsidize Companies with the Withholding Taxes of Workers, a study published today by Good Jobs First, a non-profit, non-partisan research center based in Washington, DC. It is available here.

“Diversion of personal income tax revenues into subsidies violates how economic development has been defined,” said Good Jobs First Executive Director Greg LeRoy. “States are draining a revenue source that helps many of them address structural deficits.”

Paying Taxes to the Boss traces the rise of 22 subsidy programs derived from personal income taxes (PIT) that together cost about $684 million a year. “These programs are justified in the name of job creation, but they often end up subsidizing companies to move existing jobs from one state to another. In other cases, they go to employers that threaten to move unless they get paid to stay put,” said Philip Mattera, research director of Good Jobs First and principal author of the report.

“We recommend that states seriously consider abolishing PIT-based subsidies. Short of that, we urge Truth in Taxation: that companies be required to disclose the details of how much money is going where on every pay stub of affected workers,” LeRoy added.

The report examines South Carolina’s PIT-based subsidy program, known as Job Development Credits, or “JDC”. The JDCs are considered by the state Department of Commerce to be the “most significant incentive created by the 1995 Enterprise Zone legislation. The programs work in various ways in different states. Some allow employers to immediately retain (and never remit to the state) a large portion of the withholding taxes generated by designated new or retained workers. Some provide cash rebates or grants calculated the same way. Others provide credits against corporate income taxes or other business levies, with the value of those credits based on the withholding taxes of new or retained workers. (Some of these credits are cash-refundable if the credit exceeds the company’s tax liability.)

The share of withholding taxes diverted into subsidies can be as high as 100 percent (such as EDGE tax credits in Illinois and Indiana) and the duration can be as long as 25 years (such as Mississippi’s Withholding Rebates). Twelve programs divert 75 percent or more of withholding, and 18 do so for 10 years or longer.

The most expensive program is New Jersey’s BEIP, which in FY2011 approved new grants worth up to $73.2 million over their multi-year terms and disbursed $178 million during the year for previously approved contracts. Among states with subsidy recipient disclosure, those with the largest number of participants in PIT-based programs are: Ohio (567), Kentucky (509), Illinois (315), New Jersey (306) and Indiana (283).

Network joins SC Small Business Chamber in screening new documentary “We’re Not Broke”

The SC Progressive Network‘s monthly movie night is changing time and location to co-sponsor the newly released 80-minute documentary We’re Not Broke. The public is invited to a free screening on Wednesday, April 25, 6:3-8:30pm at the USC Law School Auditorium, 701 S. Main.

After the screening, the film’s director, producer and writer—Karin Hayes—will be with us to answer questions. The evening will conclude with a discussion of the next steps to advocate for Congress to close corporate tax loopholes, end offshore tax havens and resist another repatriation tax holiday. This free event sponsored by the SC Small Business Chamber of Commerce.

With the United States in the grip of the worst economic recession since the Great Depression and an unprecedented budget deficit, the conclusion that our country is broke seems unquestionable. At least that’s what politicians and pundits want ordinary citizens to believe as they call for massive spending cuts.

Karin Hayes and Victoria Bruce’s searing exposé reveals that, strangely absent from this rhetoric, is the infuriating fact that multibillion-dollar corporations are based in the U.S., make money from American consumers, and often even receive lucrative contracts from the government, yet pay nothing in U.S. income taxes. By exploiting tax-law loopholes and spending millions on lobbyists to pressure politicians to protect their interests, corporations pocket billions while the less-connected middle class disappears, and the poor get poorer.

We’re Not Broke explores how the government has allowed this inequality to develop and the growing wave of discontent that it has fostered. Presaging the larger wave of protests that have arisen in recent months with the international Occupy movement, the film follows a number of activists who have had enough and are demanding that corporations finally pay their fair share.

The rotten Apple in the tax barrel

By Scott Klinger
Business for Shared Prosperity

Apple has gone on a very public tax strike. Months after reporting the second highest quarterly profits in U.S. history, America’s favorite company is refusing to bring home more than $60 billion of offshore funds in protest of the taxes it would have to pay.

Apple paints its predicament as unfair. Yet Apple’s funds did not build up offshore because its iPhones, iPads and Macs are so much more popular overseas than they are at home. Though more than two-thirds of its retail stores are in the United States and Apple sells more product in the U.S. than in any other nation, it reports to shareholders that it made 24 cents in pre-tax profit for every dollar of sales in the United States, compared to 36 cents profit on every dollar of sales abroad.

Apple’s profit margins are so much lower in the U.S. and billions of dollars of cash piled up offshore because Apple’s accounting and tax staff is as clever as its engineers and product designers. They take some of their profits earned in the United States and through accounting hocus pocus transform them into foreign profits that are not taxed in the U.S. until they are returned here.

Here’s how these tax avoidance strategies work. Apple conducts the bulk of its product and research development in the United States. This work is done largely by engineers educated in U.S. schools, often using basic research that was funded by U.S. taxpayers. Apple then takes the patents earned by its U.S. labs and registers them offshore in tax haven nations that impose little or no taxes on income on royalties from patents and other intellectual property. When Apple sells an IPod or Mac, it charges a lot for the use of the patents, telling the IRS that without this intellectual property, the product would be virtually worthless. By doing this, Apple transfers much of the profit from each sale to the tax haven, while retaining the costs of research, advertising and management in the United States.

Apple’s transfer pricing shenanigans are legal, but drew criticism from tax justice advocates, particularly in Europe. Since then, Apple’s tax disclosures are far more opaque, making it impossible to discern whether they have backed off from their aggressive tax management, or whether they simply don’t talk about it publicly anymore.

Tax haven abuse by corporations and individuals costs the U.S. Treasury $100 billion a year. One way to begin to solve this problem is to require improved corporate tax disclosure. If Apple’s customers and other taxpayers could see that Apple was booking the largest share of its sales in the United States, while it booked most of its profits in Ireland, the Netherlands and other tax havens, it would provoke important and necessary discussions. Another means of stemming the abuse would be to treat foreign subsidiaries managed and controlled from America as U.S. operations for tax purposes, a change proposed by Senator Carl Levin in the new CUT Loopholes Act.

When companies like Apple aggressively avoid their fair share of taxes, they shift the tax bill to their customers and other taxpayers. In the 1950s, corporate income taxes accounted for nearly a third of total federal government receipts. Last year, corporate taxes accounted for less than 8 percent of Treasury receipts, an all-time low.

The deficits that result from corporate tax avoidance has increased pressure for the government to cut spending, including spending on the very sort of basic research without which Apple, Google and Microsoft would not exist. The first modern computers and the Internet were not invented by people named Jobs, Wozniak, Hewlett, Packard or Gates, but by unsung scientists working on government-funded research, paid for by taxpayers. That taxpayer-funded government support continues today: Google co-founder Sergei Brin, for example, received a National Science Foundation graduate research fellowship promoting digital libraries while laying the foundation for what would become Google.

Apple’s tax strike is shortsighted. By denying the government tax revenues, Apple is refusing to help plant the seeds from which the next great technological innovations will grow.

Scott Klinger CFA is Tax Policy Director for Business for Shared Prosperity. Reach him at scottklinger@businessforsharedprosperity.org. Article courtesy of American Forum.