Posted on Sun, Dec. 17, 2006
EDITORIAL

S.C. Class Warfare?
Sanford should broaden tax-cut plan's appeal


The politics of resentment is a powerful force in South Carolina. So S.C. Sen Brad Hutto, D-Orangeburg, probably scored some points last week against Gov. Mark Sanford's proposal to buy down the state income tax with a 30-cents-per-pack increase in the cigarette tax.

Instead of an undeserved tax break for upper-income South Carolinians, Hutto said, the state should apply any added cigarette-tax revenue toward health-insurance coverage for working people. Thus does the senator revive an idea pitched this fall by Sanford's unsuccessful Democratic opponent Nov. 7, Sen. Tommy Moore of Clearwater.

It was an idea we (and many others) liked. But Sanford's libertarian outlook, shared by many S.C. residents, doesn't allow for massive new programs financed with tax increases. Sanford has said many times he will only accept a tax increase accompanied by an equal or greater decrease in some other tax.

Since taking office in 2003, he also has pitched, many times and in many forms, reducing S.C. income tax rates. Slashing the income tax, he says, would stimulate private investment in the state - a necessary precursor to the creation of high-pay knowledge-economy jobs.

The problem with this proposal is its inherent regressiveness. A rate reduction would benefit high-income residents the most - reinforcing Hutto's point.

Whether the senator's playing of the resentment card is enough to sink Sanford's proposal is unclear. Class warfare traditionally has been a Democratic game. But some Republican S.C. legislators are populists at heart. And many Republicans also are interested in expanding health-insurance opportunities for working people.

By reshaping his income-tax reduction proposal, Sanford could cancel out the resentment card. The state's top income tax rate of 7 percent applies to adjusted gross incomes of $12,650 - below the poverty line for some S.C. families. That is unfair. The state could provide real tax relief for low-income families by exempting adjusted gross incomes below, say, $25,000 from the top S.C. marginal income tax rate, while lowering that rate overall.

Higher-income taxpayers would still get a nice break, and the hideous practice of overtaxing the working poor would end. Sanford can immunize himself against political class warfare, in short, by showing real sensitivity to S.C. families that are barely making it in our still-too-marginal economy.

Careful, Gov. Easley

One trial balloon that deserves pricking is N.C. Gov. Mike Easley's notion that part of the temporary half-cent sales tax increase enacted in 2001, supposedly for two years, be made permanent. The increase, which lifted the state sales tax rate to 7 percent, helped N.C. legislators deal with a billion-dollar budget deficit that year but has remained on the books past its "expiration" date.

Legislators this year voted to phase out the tax increase. A quarter-cent dropped off the sales tax Dec. 1, and the remaining quarter-cent is scheduled to drop off July 1.

Now, Easley is asking legislators: "Is there something we'd rather do with that quarter percent to help those in the middle and lower income [ranges], rather than just drop it?"

If some North Carolinians truly need state help, let Easley propose a new plan, including a way to fund it. Keeping the remaining "temporary" quarter penny would break the state's promise to return it, and legislators shouldn't allow that to happen.





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