In the S.C. House, members of the Freedom Caucus and even real Republicans were of course complaining Wednesday about the undelayed legislative pay raises, and not unreasonably so. But there was also restlessness over the House's failure to pass a quicker plan to slash income taxes, and the fact that what it did pass hasn't made it into law yet.
They weren't simply claiming that the additional $1 billion forecasters had just certified for the budget proved it could have been done, although there were some such claims. Rep. Kathy Landing suggested -- based on the comments by the finance director of a single state agency -- that lawmakers easily could have whacked 5 percent out of all state spending, and by so doing passed House leaders' abandoned plan to immediately cut the state's top income tax rate from 6 percent to 3.99 percent.
That initial plan whose demise Ms. Landing bemoaned would have provided a $1.2 billion-a-year tax cut for 19 percent of income tax filers, but only with a $940 million subsidy from higher taxes on 59 percent of filers. (That reelection-challenging math, not the cost, was why it was abandoned.) Looked at another way, cutting the tax to 3.99 percent would have cost more than $2.1 billion if no one's taxes were raised.
Never mind that even if you cut the entire $14.5 billion state budget by 5 percent, that would save just $725 million. Or that more than $1 billion of the budget actually funds debt payments and tax cuts (it's an accounting thing), so a 5 percent across-the-board cut would really save only about $650 million -- or less than a third of the money needed for that tax cut for 19 percent of S.C. income tax filers.
Never mind too that two-thirds of the new $1 billion the Board of Economic Advisors certified on May 20 was one-time funding, so cutting taxes based on that would have blown a huge hole in future budgets.
The missing consensus
Of course, I could come up with a ton of stuff to cut from the state budget if given the chance. But what counts isn't one person's ideas about how to cut the budget; what counts are the ideas that a majority of the House and a majority of the Senate are willing to vote for.
And as we saw back during the depths of what some people refer to as the Great Recession, lawmakers simply aren't willing to make the hard choices about programs and whole agencies to eliminate, even when refusing to do so means they have to make across-the-board cuts, which can cripple some essential programs while continuing to prop up nonessential programs.
But I digress.
All this nonsense about how the Legislature could slash taxes even more than it has if only all you people would just do what I want you to do -- which actually wouldn't be realistic even if the "if" occurred -- came just after Sen. Sean Bennett had stepped to the lectern across the lobby to present "my annual tax talk."
It's not a complicated talk, and frankly it doesn't go nearly as far as I would, but it's about the closest thing in the Statehouse these days to a reality check. And since so many legislators seem to have no interest in reality, I thought it was worth passing along to our legislators' constituents, in hopes that y'all can reason with your representatives, and senators.
Eliminating the state income tax, as the bill the House eventually passed claims it eventually will do, is just "that latest shiny lure," Sen. Bennett said. And although that's "a noble cause" and "a worthy discussion" -- as is, he said, some senators' simultaneous goal of eliminating property taxes -- such significant tax changes need to be discussed as part of "a more holistic approach" to tax policy.
The facts of budget life
Sen. Bennett comes to the table assuming we can and should cut the size of state government. But he also realizes that this requires agreement over what to cut, so he starts with the context of how much cutting would be required: To eliminate both the income tax and the property tax, he said, would cost $17 billion every year -- or more than the entire budget the Senate had signed off on minutes earlier. Even eliminating only the income tax would mean cutting that budget in half.
Not realistic? How about just raising the sales tax, which people seem not to find as objectionable as the other big two?
"Right now," he said, "we're at a 6 percent sales tax in South Carolina." Eliminating the income tax would mean "we're going to need to add another 6 cents to our sales tax, so we're at 12 cents -- a 12 percent sales tax.
"If we eliminate that property tax that our counties are (collecting), that's another 9 percent to our sales tax, so now we're up to 21 percent."
And "Keep in mind many counties have local-option sales taxes already, so now we're up to 24 percent; if they have a local option hospitality tax, that's 27 percent."
For comparison, the state with the highest combined state and local sales tax, Louisiana, collects an average of 10.12 percent, according to the anti-tax Tax Foundation. South Carolina's combined average across our 46 counties, 7.5 percent, is already the 18th highest in the nation, which we would consider an unacceptably high ranking if we were talking about the income or property tax.
Of course not even the Democrats would propose raising the sales tax to 27 percent -- or even 21 percent -- and that's sort of Mr. Bennett's point: You can't just eliminate one of your three major sources of income -- and certainly not two of them. Even if you're willing to slash government services in half, which nobody with any sense of responsibility is willing to do. And maybe not even those with no sense of responsibility. Even the freedom fighters acknowledge that we need roads and police, and a Legislature that gives them their platform.
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