‘Progressive’ tax agenda aims to improve South, jump-start debate

By CINDI ROSS SCOPPE

Associate Editor

IT’S SUMMERTIME in South Carolina, and that means it’s time for another critique of our state’s antiquated tax structure.

This time, the review comes from one-time Democratic congressional candidate and now political blogger and activist Andy Brack, who commissioned a couple of tax policy analysts in Georgia to study Southern tax structures for his new group, the Center for a Better South.

Not surprisingly, South Carolina doesn’t come off very well in their book, Doing Better: Progressive Tax Reform for the American South. We get credit for just two of the 11 recommended tax policies. But then, no state does particularly well.

“The overall point of this whole thing is that the discussion needs to happen, and the discussion has not happened,” Mr. Brack told me during a recent swing through Columbia to talk up the book. (You can download it at http://www.bettersouth.org/.) He hopes that by bringing the ideas together in one place, he can get a more substantive debate going. To that end, he is sending copies to all the governors, members of the legislative leadership and state Democratic and Republican party chairs and executive directors throughout the South.

And if he is able to provide “some intellectual fodder for progressive candidates of either party to use,” then so much the better. (The book defines “progressive” as “moving things forward to benefit all in a fairer way” — a definition that would surely be disputed by fiscal conservatives who see it as the modern-day replacement for the rejected word “liberal.”)

“Anybody who goes to a legislature in the South will find similar and stale debate,” said Mr. Brack, who determined that if Democrats are ever to regain strength, they need to come up with a positive agenda. “Instead of being against things, you need to stand for something.”

Some of the ideas he’s pushing — particularly a refundable earned income tax credit, which has as much to do with social policy as tax policy — would find support only among Democrats, and then only those of the most “progressive” variety.

But most of the ideas are just basic common sense that should appeal to anyone who accepts the notion that government plays an important role in our society, and that the tax system that funds it should be rational.

For instance, when the book calls for eliminating sales tax exemptions and holidays and taxing more services, it notes that these moves toward modernization, simplicity and fairness would allow states to lower their sales tax rates.

In their call to close corporate tax loopholes, the authors acknowledge that there’s a legitimate debate about whether states should tax corporations. But they say that as long as states do tax corporations, “businesses across the board should be treated fairly.” Always an issue, that’s particularly important with corporate taxes because the loopholes usually give preference to larger, often out-of-state, businesses.

The book even calls for what would amount to a tax cut for middle- and upper-income people — indexing income tax brackets to inflation.

South Carolina is one of just two Southern states that do that. But in one of the few surprises in the book, we also turned up on a list of just two Southern states that discourage open debate on the effects of our tax policy decisions.

All the Southern states except South Carolina and Georgia regularly publish some sort of “tax expenditure” report, which shows the cost — or value, if you prefer — of each tax break. That way, legislators and citizens are quite aware of the tax breaks their state offers, and therefore better able to say which ones should be continued or expanded, and which should be scaled back or eliminated.

Making that information easily and routinely available in South Carolina might not lead to a single change in our exhaustive lists of exemptions and exclusions and credits and loopholes in the sales, income, property and other taxes. But at least we’d be sticking to our policy because we supported it — and not because we simply didn’t know about it.

Other ideas that we ought to consider include replacing age-based tax breaks with income-based breaks and making performance reviews a routine part of the budgeting process, in order to provide the most important services in the most effective way possible.

Finally, a serious review of tax policy wouldn’t be complete without calling for higher cigarette taxes. But the book throws out one intriguing idea I hadn’t seen before: Treat cigarette taxes as one-time money, to pay for infrastructure, rather than, say, funding Medicaid.

That recommendation helps the authors adhere to their “fair to the poor” policy (“The tax should not be used as a way to shift the responsibility for funding government to low-income citizens.”). But it’s also based on the optimistic notion that higher cigarette taxes will reduce smoking enough to make it an unstable source of revenue.

But even if our lawmakers do finally decide that discouraging kids from smoking is more important than adhering blindly to no-tax policies, there’s little reason to believe they would follow this recommendation for how to spend the extra money. After all, they aren’t yet fully convinced that it’s a bad idea to spend surplus money on ongoing programs.

Ms. Scoppe can be reached at cscoppe@thestate.com.