Recently the editorial page of The State initiated a debate on
the tax structure in South Carolina in order to make the tax system
more logical. Adjectives such as “exciting” are being used to
describe the school financial officers’ proposal to increase sales
taxes and to reduce property taxes. Undoubtedly we need to replace
the current dilapidated system, but the assertion that we need “to
spread the tax burden as widely and as thinly as practical” is wrong
— because wealth and income in both the United States and in South
Carolina are so unevenly distributed.
Sales taxes are regressive taxes, and they are the last thing
that we need to implement, especially when one considers the
hemorrhaging of the state’s manufacturing base and the resulting
loss of decent-paying jobs to Third World countries.
You can’t have a successful debate on tax structure without
knowing something about how wealth is distributed among the
population. In the United States, the wealth distribution is
exponential. The top 1 percent owns about 40 percent of the national
wealth. The top 20 percent owns about 80 percent of the wealth.
Contrast that with this: The bottom 60 percent owns only 5 percent
of the national wealth, and, incredibly, the bottom 40 percent owns
nearly zero percent of the national wealth.
If you suspect there is something intrinsic about free markets
that causes those inequities, then you are right. Moshe Levy of the
Jerusalem School of Business is one of a handful of research leaders
in the emerging field of microscopic simulation of financial and
economic systems — a new branch of economics that uses the
mathematical tools of particle physics to explain the flow of money
in real economies.
Many people will be surprised by Dr. Levy’s conclusions, since
they are often contrary to contemporary neo-liberal thought. His
most powerful statement is: “Our analysis leads us to conclude that
the extreme inequality in modern Western society is a very
fundamental and robust outcome of the nature of the capital
investment process. Furthermore, this inequality is driven primarily
by chance, rather than by differential ability.”
That’s right, the investment process itself causes extreme wealth
inequality — and chance itself determines (initially) the winners
and losers of the investment game. Given the process on which Dr.
Levy’s arguments are based, one can also easily infer that once
wealth inequality takes place, it is unlikely that the winners of
the investment game will move to the bottom, or vice versa. These
two ideas may portend dire consequences for poor states such as
South Carolina.
What does all of this have to do with sales taxes? Given that we
are one of the poorest states, we don’t have many wealthy people to
tax to begin with, so the majority of the burden is passed down to a
middle class that is fed up with property taxes ad infinitum.
Naturally, the middle class wants to spread the burden to other
groups, and the only groups left are the working class and the
working poor. These folks are hard-working, and they represent the
heart and soul of South Carolina. To me it is unconscionable that we
would even consider raising taxes on people who have done so much
for our state, yet don’t have material possessions in proportion to
their contributions.
The truth is that there can be no satisfactory state tax scheme,
regardless of how we arrange it, independent of the federal tax
system. The vast majority of the wealth in the United States is
outside of places such as South Carolina, and the only way to access
this prospective tax base is on the federal level.
If we really intend to uplift South Carolinians from the adverse
effects of a global free market system, then our federal
representatives are going to have to start working with congressmen
of other states that share similar prospective fates.
Mr. Whittington is the Richland County chairman of the United
Citizens
Party.