News analysis by Bill Davis, senior editor | Few realistically expect much of value or use to emerge from the special bipartisan House Tax Policy Review Committee that state Rep. Tommy Pope (R-York) is leading. But then again, unexpected things have happened in recent years at the Statehouse, which now no longer sports the Confederate flag on its dome or grounds.
Last fall, House Speaker Jay Lucas (R-Darlington) tapped Pope to lead 11 other House members in an expansive review of how the state taxes its citizens.
Five years ago, Pope served on a House Republican Caucus tax review committee that was led by state Rep. Tommy Stringer (R-Greer). Stringer’s Republicans-only committee looked solely into the state’s massive sales tax exemptions, while Pope’s committee includes Democrats and is looking at sales, property and income tax in South Carolina.
Pope’s committee, which has met several times over the last few months, will be following some pretty big footprints, including those left by Stringer and the Taxation Realignment Commission, or TRAC. Seven years ago, the blue-ribbon TRAC panel published a report mapping out a series of recommendations to move the state’s tax policies forward. Including dumping about a third of the state’s almost $3 billion in sales tax exemptions..
Both efforts led to dead ends. Both were hailed as “educational” and good tools, but little changed.
“I’ve been reflecting on the old saying that insanity is doing the same thing twice, and expecting different results,” said Pope.
Looking for common ground
Into that void in the fall, Pope and his 11 cohorts will now look into how to find the golden means of widening the state’s tax base while lowering its overall rates, and whether recommendations can be neutral enough to survive politically. Pope said Lucas wants his mantra to be “flatter, fairer, broader.”
“The problem with tax review and change is that no one will stay still long enough to hear the punchline,” jokes Pope, fresh from a congressional primary loss. He said any initial “losers” in tax reform will, given time, benefit. “Prosperity across the board will fill in the gap.”
Committee member state Rep. Chandra Dillard (D-Greenville) said she was “not quite sure what our exercise of learning and listening will turn into, given what hasn’t happened in the past.”
Dillard liked the idea that there will at least be more dialogue between House members. She said she will be “especially focused” on discussions regarding Act 388. “That thing is a monster,” Dillard said.
Act 388 is the contentious state law that shifted the funding of local schools from property taxes levied on first homes to a statewide 1-cent increase in sales tax. The unintended consequences of the law have led to county school districts being hamstrung fiscally and to an increase in commercial property taxation, which can chills commercial investment.
A political Catch-22
Act 388 has been criticized as making perfect political sense, as it appealed to homeowners, but no fiscal sense, especially during the Great Recession when sales tax collections dropped.
Pope and his team now face the uphill battle of espousing tax policy changes that could make all the fiscal sense in the world, but not any political sense.
Not only does the committee have until next year to come upon solutions that will appeal to the tax-averse, GOP-dominated House, but it will have to craft solutions that pass muster in the Senate.
The Senate is also Republican-dominated, but has taken a more conservative turn in recent years with the climb of current Majority Leader Shane Massey of Edgefield. And then there’s the matter of the anti-tax hawk and “filibuster leader” state Sen. Tom Davis (R-Beaufort).
Davis said that he’d like to first see happen would be the “undoing the unfair taxation of 6 percent (commercial) properties caused by Act 388 and eliminating — in the manner recommended by the TRAC Commission — all of the special-use exemptions to the sales tax.”
Davis holds that the revenue yielded by the latter can be used to provide tax relief to the 6 percent properties.
Massey said his optimism for the committee’s work was tempered during this last legislative session when the House and the Senate sparred over a roads bill. The key element was the Senate plan to send some tax relief, but the House drew a deep line in the sand.
Removing exemptions seen as tough
Politically, Massey said any changes to the state’s sales tax exemptions would be a tough political fight “because they are very popular with the people.”
Massey was referring to the $3 billion in sales tax exemptions that state doesn’t pursue from categories like power, medicine and food, which the senator said make up the lion’s share of the $3 billion.
“I think (the committee) is more of a show,” said Massey.
According to state officials, South Carolina is currently exempting more sales than it is taxing in sales as the state also leaves untouched most services, like lawn-mowing or dog-grooming. And that number is growing as the state continues to transition from a manufacturing base to a service industry base.
Pope, echoing the punchline delivered by House Majority Leader Gary Simrill (R-Rock Hill), said that any attempt to remove any sales tax exemptions will result in “Lobbyist Full-Employment Day” in the Statehouse.
Pope said that his committee will begin meeting again after the summer, once its members have had time to tend to work and their families. He said he hoped that by then, a new tax modeling software package will be completed so his committee members will be able to see immediately how a proposed tax policy change could directly affect the state’s economy and the state’s tax system.
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We Can Do Better, South Carolina!
Sounds like the same ole – same ole!