Grooms tax plan excellent starting point for debate

FOR 14 WEEKS, state lawmakers have supposedly been debating tax reform. But up to now they have not done so; not really.

Finally, lawmakers have before them a framework for beginning that debate. It is a plan that would not only re-form our tax system in a fundamental way but also confront our state’s single biggest impediment to catching up with the rest of the nation. It may not be perfect, but it’s a smart place to start.

A sweeping proposal by Sen. Larry Grooms, which the Senate will debate today, would put the state in charge of funding public schools, a duty given it by the state constitution but until now shared with local government. It would also face the fact that, currently, children born into poor districts have little chance of becoming productive, prosperous members of society, rather than dragging down our economy.

Unlike earlier proposals, which simply substituted state revenue for some local revenue, thereby locking in current inequities, the Grooms plan distributes money to schools based on students and student needs. The $2.4 billion proposal would eliminate all local school property taxes and replace them with a higher and slightly broader sales tax, a modest statewide property tax and much higher taxes on cigarettes, alcohol and property sales.

What are its flaws? While it does broaden the sales tax by eliminating some exemptions, it does nothing to transform it into a 21st century levy that reflects our nation’s shift from a goods to a service economy. Without accounting for that, the plan would shift funding for the state’s most crucial obligation from the stable and growing property tax to a tax that is becoming less stable by the day, as more and more of the national consumer dollar is spent on items not covered by the sales tax. Simply put, our state must tax more services.

Beyond that, the plan would apply the higher sales tax to the one category that does more than anything else to make it regressive — groceries. Other flaws: It doesn’t index cigarette and other per-unit taxes to inflation. It doesn’t touch the income tax, which is odd in a comprehensive measure, since that’s one of the three major sources of revenue. And we’re not sure it directs enough funding to schools with poor children to address the current inequity.

But Sen. Grooms is the first to acknowledge that his proposal has shortcomings. Neither he nor his supporters — chief among them Democratic Sen. Vincent Sheheen — sees this proposal as the answer. They see it the way the Senate, the Legislature and all of us should see it: as a starting point.

The Grooms plan is the first since the much-discussed, but never debated, Quinn-Sheheen proposal to offer an appropriate framework for a debate about what our tax system should look like — and do. As such, it will attract slings and arrows from all sides.

That too is appropriate. This is the time for all parties to come to the table with their arguments for why this or that exemption should still exist or why this or that new item should be added to the list of taxes. This is the time to talk about the balance of taxes between businesses and individuals and between rich, middle-income and poor. This is the time to discuss the larger economic implications of a higher sales tax or income tax or specialty taxes.

In short, opportunity for a real debate is before us. It is long overdue. It is welcome. Senators must seize it.