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Date Published: November 6, 2003
Budget battle promises bumpy road ahead
Gov. Mark Sanford has begun early on his latest campaign: lowering state income taxes.
If nothing else, the governor is persistent, consistent and insistent. He believes that leaving more money in taxpayers' hands will jump-start small business growth, stimulate revitalization of South Carolina's sagging economy and make the state more competitive with other states in the region.
In order to compensate for lowering the income tax rate from 7 percent to 5.9 percent, Sanford's plan calls for raising the cigarette tax from the present 7 cents -- fourth-lowest in the nation -- to 68 cents or the national average, and applying the 5 percent state sales tax to lottery tickets. These new taxes would bring in an estimated $222 million and cover the 15 percent reduction in income tax revenue, according to the governor's figures.
There's more in his "jobs and economic growth plan," such as reforming the workers' compensation system by sending all claims to mediation before a hearing with the workers' comp board in order to lower workers' comp insurance rates for businesses, providing economic incentives to lure and encourage the growth of companies that make pharmaceutical and medical products (Biopure, take note) and establishing nontraditional high school programs geared toward developing skills better suited for knowledge-based jobs, to mention just three of his initiatives.
Of course the devil is in the details, and already Sanford's plan is drawing criticism. For example, there are concerns the plan leaves the state Medicaid program without a stable source of funding for the poor, elderly and disabled. During the last legislative session the governor called for funding Medicaid with a hike in cigarette taxes but House Republicans nixed it. Sanford is now saying he is working on a plan to fully fund Medicaid without the use of increased cigarette taxes. We will await the details of that plan.
At the time Sanford proposed using increased cigarette taxes to pay for Medicaid, we thought it was a sensible plan. Making smokers pay more for the privilege of lighting up is the equivalent of a "sin tax," just like the taxes on alcohol. Both habits, smoking and consuming alcohol, are voluntary and involve health and societal risks. Those who choose those habits should be prepared to pay their fair share in taxes, and more.
We would go a step further on the cigarette tax issue: jack it up above the national average of 68 cents. After all, the state is in the midst of a serious fiscal crisis, with red ink showing up every year in the budget in alarming numbers. South Carolina government needs more money to provide the services its citizens demand and deserve. A substantial cigarette tax should be a no-brainer.
We agree that small businesses in the state are, in the governor's words, "The real backbone of job creation." The more growth that can be encouraged and stimulated by less taxation and regulation, the better for all South Carolinians. More jobs are desperately needed at this point in the state's history. A low-tax state always attracts more businesses, large and small.
Of course, state legislators are already at work preparing their economic stimulus plan. The House Ways and Means Committee is ginning up a proposal to hike sales taxes by 2 percent and remove exemptions on a host of current exempt businesses, products and services such as sales tax cap formulas for cars and manufactured housing, telecommunications, newspaper circulation and direct mail advertising material, to name a few. Some painful days are looming for all these previously tax-exempt targets of opportunity for legislators seeking more revenue for a cash-strapped state.
And it also should be noted in passing that the fiscal crisis now facing the state was the handiwork of a Legislature that over-estimated projected revenues and under-estimated the present economic slowdown. Rosy scenarios trumped realism and fiscal responsibility.
The governor has started the ball rolling. Strap on your seat belts -- the next installment of the Battle of the Budget is being joined, and a bumpy road lies ahead for our public servants and their employers, the taxpayers.
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November 13, 2003
Summerton audit could be final in 2 weeks
