ISSUE 14.13 | MARCH 27, 2015
NEWSFederal Reserve to educate S.C. leaders on tax credit
By Andy Brack | The Federal Reserve Bank of Richmond will be in Columbia May 21 to meet with legislators and community leaders to talk up the earned income tax credit, a federal program it describes as the nation’s largest income-support program for low-income taxpayers.
The federal tax credit currently steers about $1 billion a year to the state as more than 500,000 South Carolina federal tax returns file annually to receive the credit, which only goes to working people as an incentive to stay in work. The benefit averages more than $2,300 per return in South Carolina. For many low-income families, the tax credit plays a significant role in lifting them out of poverty, analysts agree.
The May 21 meeting is a big deal for the state, says Tim Ervolina, head of the United Way Association of South Carolina.
“When the institution that’s responsible for monetary policy tells you that you should do something that will improve economic growth and reduce poverty, you might want to listen.”
For years, Rep. Gilda Cobb Hunter, D-Orangeburg, has pushed for the state to provide its own earned income tax credit to supplement the federal credit as a poverty-fighting measure. A bill currently in the House, H. 3029, seeks to provide a state credit valued at 10 percent of the federal credit with incremental increases until it was worth 20 percent of the federal credit. The bill has no co-sponsors to date, but last year, a senior House Republican signaled that the idea had merit, as highlighted in this Statehouse Report story.
Reagan backed the EITC, but S.C. Republicans haven’t
Despite the credit being championed in the 1980s by President Ronald Reagan as “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress,” South Carolina and most Southern states have not adopted a comparable state EITC to provide an additional benefit to working families. Observers quietly suggest that it’s because state Republicans view the tax tool as a Democratic handout, even though the program has bipartisan roots and rewards only those who work.
So now comes the visit by the non-partisan Richmond Fed, which has been meeting around the region with leaders to educate them about the success of the federal EITC. On Tuesday, they take their educational show to Raleigh where they will meet with more than 200 state leaders.
Implicit in the Richmond Fed’s May visit to Columbia is the notion that any state without a state-based earned income tax credit may be at an economic disadvantage. Why? Because they may be missing a way to stimulate local economies by putting more cash into the hands of low-income families, who largely recirculate additional money near home which, in turn, spreads economic vitality throughout communities.
“To have an institution like the Federal Reserve to weigh in on the establishment of a state EITC carries a lot of weight,” said Bernie Mazyck, executive director of the S.C. Association for Community Development Corporations (SCACDC). “The Federal Reserve also has some of the best researchers in the country to analyze economic policy. Their endorsement of a strategy to improve a state’s economy is very important. South Carolina is fortunate to have the Federal Reserve express an interest in our state’s prosperity.”
How EITCs work
At the federal level, an EITC is a refundable tax credit available for low- to moderate-income working individuals and families. Not only do those who want to get it have to work, but they have to file with the IRS to receive it.
The benefit depends on income and the size of a family. In 2013, for example, a couple with no children could earn no more than $19,680 for a maximum benefit of $487. A couple with one child could earn no more than $43,210 for a maximum benefit of $3,250. Learn more here.
Currently, 25 states offer an earned income tax credit. Of those, 21 are refundable, which means that recipients get a check from the state to lower their tax burden and offset other tax payments. Nonrefundable credits reduce an income tax liability to zero, but don’t provide a check for further tax relief. (In South Carolina, most people in poverty pay no income tax.)
More on the May 21 meeting
The Federal Reserve’s May 21 education session is a legislative breakfast, co-sponsored with groups like the SCACDC. The meeting is expected to draw more than 100 legislators, policy wonks and community leaders to hear how the federal EITC works. The bank, which has a branch that works with communities and groups to promote economic growth, also is expected to outline how the tax credit benefits communities, said Jeanne Milliken Bonds, community development manager for the Carolinas for the Richmond Fed.
“The purpose of this is to have an economist come in and explain how it works and why it works,” she said.
Andy Brack is editor and publisher of Statehouse Report.
COMMENTARYWhen tax cuts become bad public policy
By Andy Brack | It’s almost a given at the Statehouse that if you’re Republican, you’re for tax cuts. It’s just an assumed part of the political playbook — the same document that includes the think-tank-generated mantra that scores of legislators embrace to get elected — to oppose tax increases.
This tax worldview creates a limited policy framework with which lawmakers can operate to deal with the challenges of government. When tax hikes are off the table and tax cuts are always on the table, what can a state rely on for new revenue as the price of everything rises? Economic growth — or some clever scheme than makes new revenue look like anything other than an across-the-board tax (hence, the explosion of “fees” fueling state government).
So as an academic exercise, let’s challenge the notion of tax cuts. Is there a point when there can be just too many tax cuts?
The discussion has relevance now because of big policy discussions going on in Columbia. Gov. Nikki Haley, who seems to have never seen a tax she likes and who has slammed more borrowing to pay big needs even though she has backed a billion dollars of borrowing, wants more money for roads. But she says she won’t approve extra taxes on gas unless there is a commensurate cut in income taxes. In other words in a time where much of state government is funded at levels from a decade ago and hasn’t recovered from the effects of the Great Recession, she wants to cut revenues even more and shrink general government, which would be so draconian that services taxpayers expect would just have to go.
Meanwhile, the state Senate is backing a plan to pay for billions of ignored road needs with extra gas tax money without Haley’s tax cut. (Haley says she’ll veto that plan.) And two House members say the whole tax system needs to be reformed by eliminating $2 billion of annual special-interest tax breaks to fuel needed investments in roads and schools.
But back to the question at hand. Just as it becomes unhealthy to stop eating food (you become anorexic), is it unhealthy to continue to cut taxes, year after year, election after election?
National analysts Katherine Barrett and Rich Greene say the tax cut question is a “tricky game” for states. In a new article for the Council of State Governments, they challenge the notion that tax cuts always lead to improved state economies. Just look at the 20 states with the highest state-local tax burdens, they say. Six are in the Tax Foundation’s top 10 New Economy Index, which highlights states likely to have continuing economic health. On the other hand, Kansas, which had some of its largest tax cuts in history in 2012, continues to reel from the impact of lost revenue. Predicted “growth” just did not trickle in.
Barrett and Greene say businesses obviously will locate in states that offer low taxes — just as long as services are good. But they won’t move to or remain in a state where tax cuts impede services that businesses need, such as good roads to truck goods to market. And they won’t go where inconsistent tax policy yields fluctuating, unpredictable bills.
“Growing in a state isn’t just the function of putting up offices or factories. It requires filling those buildings with men and women who can do the necessary jobs without tons of expensive training and retraining,” Barrett and Greene write. “The kind of educational system that builds such a workforce isn’t cheap. And it’s primarily paid for by tax dollars. So, the moment that tax cuts require reducing the quality of K-12 or higher ed, the less competitive a state becomes.”
So listen to the message: When tax cuts slash into the marrow of education — as would happen if roads are fueled by a revenue-neutral cut in income taxes — legislators risk making South Carolina less competitive, which means fewer jobs, less growth and a tougher time for everybody.
There is no free lunch to pay for a decade of bad decisions that underinvested in education and roads. If South Carolina wants to move forward, leaders need to be more flexible on tax policy.
SPOTLIGHTS.C. Hospital Association
The public spiritedness of our underwriters allows us to bring Statehouse Report to you at no cost. This week’s spotlighted underwriter is the South Carolina Hospital Association, the Palmetto State’s foremost advocate on healthcare issues affecting South Carolinians. The mission of SCHA is to support its members in addressing t
he healthcare needs of South Carolina through advocacy, education, networking and regulatory assistance.
Founded in 1921, the South Carolina Hospital Association is the leadership organization and principal advocate for the state’s hospitals and health care systems. Based in Columbia, SCHA works with its members to improve access, quality and cost-effectiveness of health care for all South Carolinians. The state’s hospitals and health care systems employ more than 70,000 persons statewide. SCHA’s credo: We are stronger together than apart.
- To learn more about SCHA and its mission, go to: http://www.scha.org.
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AGENDABreak for the House, not for the Senate
The House will be on Easter recess for the next two weeks. Meanwhile, the Senate will continue committee work on the state budget and carry on with other business. On tap next week:
Tuesday, March 31, 2015
- 9 a.m. — Senate Banking and Insurance Subcommittee on Regulations, S. 314, in 308 Gressette. Agenda Available
- 9:30 a.m. — Senate Transportation Subcommittee, 207 Gressette. Agenda Available
- 2 p.m. — Senate Judiciary Subcommittee on S. 590.
Wednesday, April 1, 2015
- 10 a.m. — Agriculture and Natural Resources Environmental Subcommittee, 407 Gressette. Agenda Available
- 11 a.m. — Senate Transportation Committee, 209 Gressette. Agenda Available
Medical marijuana to feral hogs, coyotes and armadillos
State lawmakers introduced 90 new bills, many of which were congratulatory in nature. Among bills to note are these:
In the Senate
Medical marijuana. S. 584 (Davis) seeks to redefine the definition of marijuana to exclude cannabidiols or certain compounds (i.e., “medical marijuana) for people who have certain non-treatable medical conditions.
Hogs, coyotes, armadillos. S. 592 (Campsen) calls for changes to allow hunting of feral hogs, coyotes and armadillos at any time of the year with a depredation permit and at other times.
Voter registration. S. 596 (Jackson) seeks to make any application for a state identification card or driver’s license serve as a voter registration application, with several provisions.
Disabilities. S. 600 (Scott) would abolish the state Department of Disabilities and Special needs and roll it into the state Department of Health and Human Services, with many provisions.
In the House
Nuclear waste. H. 3899 (Limehouse) would keep the Barnwell nuclear waste facility from receiving more nuclear waste than currently allowed and to establish a water testing requirement for the facility.
Animal tattoos. H. 3917 (Atwater) would prohibit tattooing or piercing of companion animals, as defined by law.
Insurance premiums. H. 3920 (Loftis) would allow municipalities to tax insurance premiums, with several provisions.
Report offers bold higher education vision for S.C.
A new report by top state policy and business leaders says South Carolina has a lot of higher education work to do to meet future workforce needs and economic success.
The “Competing Through Knowledge,” which was released today, outlines several goals and strategies for the state to meet several coming higher education needs. It was offered by a group that includes two former governors, a former House speaker and top business leaders.
“South Carolina’s workforce challenges are clear, and the leaders on this task force came up with a targeted set of measures to address them,” said former Gov. Jim Hodges.
Former House Speaker and Ambassador David Wilkins, who currently chairs the board of Clemson University, added, ““There certainly is a strong consensus about moving the state forward. This is an opportunity for our South Carolina to be a national leader in business-higher education collaboration and workforce development.”
Among the goals outlined in the report:
- Increasing the number of graduates in STEM — science, technology, engineering and math — fields.
- Creating more higher-education public-private partnerships.
- Training 44,000 more health care professionals who are needed by 2030.
- Boosting college financial aid for low-income and middle-class families.
The report says the state will produce more than a half million new jobs from economic expansion in the next 15 years. Just over half will require college degrees. State businesses will face an annual shortfall of 2,588 workers who need associate’s degrees and 4,149 positions for people who need bachelor’s degrees, according to a 2013 study.
“We identified the need for over 110,000 more degree recipients in the next 15 years to fill workforce needs,” said Jim Morton of Greenville, the retired vice chair of Nissan North America. “It is important that business and higher education work with policymakers to develop a plan to address these critical needs.”
The report also detailed several strategies to improve higher education:
- Funding performance incentives for higher education institutions;
- Tuition rebates for students who pursue degrees in areas of high economic demand;
- Better online access to college-level courses and degree programs;
- Increased state funding for colleges and universities that agree to limit tuition increases;
- Allowing colleges and universities the flexibility to operate like businesses; and
- Funding colleges and universities on a formula tied to the level provided by other states in our region.
- To learn more, visit CompetingThroughKnowledge.org
Empty motel, Clarendon County, S.C.
This is one of a number of derelict motels along U.S. Highway 301 in Clarendon County, writes photographer Linda W. Brown of nearby Kingstree, S.C. More.
SCORECARDFrom House to Haley, and Haley to House
Thumbs up
Myrtle Beach, Beaufort. These areas are growing like gangbusters, according to new reports. More. And more.
Road funding. Hats off to the S.C. House for passing a plan that may steer a way for money — still not enough — to get real work done on state roads. This alternative would generate about a half billion a year, but the state Senate alternative would provide $800 million. More.
No drilling. More communities are saying no to offshore drilling and seismic testing, with Sullivan’s Island and Charleston joining a long list today. State lawmakers should listen closely.
Union vote. Much as GOP-union-hating leaders don’t like it, it’s appropriate for workers at the Boeing plant in Charleston to be able to vote on whether they want a union to represent them. The showdown is April 22. Look for some vigorous politicking away from the Statehouse but on the airwaves and behind the scenes. More.
In the middle
DSS. The state Department of Social Service, still in the crosshairs of state legislators, says it needs more full-time employees, but didn’t request as many as it did recently. The Senate has released a report chock full of recommendations on ways the embattled agency can improve. More.
Higher ed. It’s hard to hear the state will have a shortfall of tens of thousands of college-educated workers over the next 15 years. It’s good that a report by two governors, a former speaker and others are shining the light on it now. Memo to legislature: Do something about it.
Thumbs down
Haley. Hats off to the Associated Press for reporting on how Gov. Nikki Haley backed $1 billion in borrowing but had the audacity to blast House members for suggesting borrowing at low rates to pay for big projects. Hypocrisy? You be the judge.
Showering. House members need to calm down over Gov. Nikki Haley’s joking comment that she sometimes feels like she needs to “take a good shower” after meeting with them. Talk to most people — they feel the same way.
NUMBER1,019
Number of special Sons of Confederate Veterans license plates on vehicles in South Carolina, according to the S.C. Department of Motor Vehicles this week. The Palmetto State is one of nine states with the tags, which feature the Confederate flag. The U.S. Supreme Court has announced it will consider a Texas case involving free speech and the plates. More.
Sorry
“I take personal ownership of this inflammatory rhetoric. This reckless statement was made in the heat of a political controversy 35 years ago. It is antithetical to my theology and my 50 years of preaching a redeeming Christ Who came into the world not to condemn the world, but that the world through Him might be saved. Upon now reading these long-forgotten words, they seem to me as words belonging to a total stranger—were my name not attached.”
– Apology last week by Bob Jones III, former president of Greenville’s Bob Jones University, about a 1980 statement on stoning homosexuals. More.
Catawba potter Georgia Harris
Georgia Harris was born on July 29, 1905, on the Catawba reservation near Rock Hill, the daughter of Chief James Harris and his wife, Margaret. Her maternal grandparents were Martha Jane Harris and Absalom “Epp” Harris. Both were potters of some genius. Martha Jane was one of the most talented potters of the nineteenth century, noted for her large vessels, while Epp Harris was a brilliant pipe maker. Georgia Harris grew up watching these talented family members at work in clay, and she began making pottery seriously around the age of ten.
Harris was educated on the reservation at the Catawba Indian School and at the Cherokee Boarding School. When she reached her full strength as a potter, much of the pottery produced by the Catawba was being sold in the mountains of North Carolina. She was immediately offended by the low prices of from 10¢ to 25¢ offered for each vessel. Shunning rank-and-file merchants, Harris sought out dealers who appreciated her art. After the division of tribal assets under the Termination Program (1961), she saw a chance to develop her mind further. Harris obtained a grant to take training as a licensed practical nurse and studied in Lancaster. When she obtained her license and began working in hospitals around Rock Hill, Harris retired from making pottery.
In 1973, Steve Baker convinced Harris to build pots for a show and sale he was curating for the Columbia Museum of Art. Baker’s proposal sparked her interest. He insisted that Catawba pottery prices were not fair and should be raised. Recalling the insulting prices offered by the North Carolina merchants, Harris agreed and raised her prices to a high of $125. This was an unthinkable move at the time. Nevertheless, the Columbia Museum of Art show was a great success and Harris sold all her vessels. As a result, she returned to pottery making as a means to supplement her retirement income. Her home was immediately sought out by pottery collectors, anthropologists, historians, archaeologists, journalists, and folklorists.
In 1977, at the Spoleto Festival in Charleston, the Countess of Italy bought one of Harris’s Indian head pots for the unheard of price of $350. This sale made the handful of Catawba potters sit up and take notice. Over the next few years, the number of active potters approached fifty, largely due to the efforts of Georgia Harris. Everyone admired her pottery-making skills and her confidence in the value of her work. Harris demonstrated pottery in numerous schools and museums, including the Mint Museum of Charlotte, North Carolina; the Schiele Museum in Gastonia, North Carolina; and the Renwick Gallery at the Smithsonian in Washington, D.C. Over the years she taught pottery making to a large number of Catawba. She was a primary instructor in the innovative class of 1976, the first effort the Catawba made to teach pottery making in a formal classroom. She also taught master potters Nola Harris Campbell and Earl Robbins.
By the time Harris retired a second time from pottery making in 1994, the number of active potters approached seventy-five persons. She died in Dallas, Georgia, on January 30, 1997. Later that same year, Harris became the first posthumous recipient of the Nation’s Folk Heritage Award from the National Endowment for the Arts.
We Can Do Better, South Carolina!