A friend observed last week that he buys shirts online because it's easy, and he can avoid the mall.

He, like millions of others, has shifted in the way he buys things to make life easier and take advantage of innovation.

But most states, including South Carolina, continue to use archaic tax systems that don't respond to changes in the way people behave, live and do business. And that's why, in large part, South Carolina faces a looming budget crisis in coming years unless something is done.

A new report says South Carolina is among 11 of the states in the nation that face the highest risk of not having enough money down the road to pay for its current level of programs and services. Because of the way the state's tax system is set up, its shrinking tax bases will grow at a smaller rate than the costs to maintain government programs at current levels.

So while South Carolina now might have a balanced budget and the first surplus in years, it has a

long-term structural deficit and scores poorly on each of 10 risk factors identified by the Center

on Budget and Policy Priorities (www.cbpp.org).

"We're not trying to tell any state that they should have higher taxes," says CBPP Deputy Director Iris Lav. "But do you have a tax structure that keeps up with the level of services you choose?"

In South Carolina, the answer is a solid no. Take a look at just a few of the risks, as identified by the Center:

Shrinking tax bases. The state's sales tax base has shrunk 13.4 percent since 1990 -- much higher than other states -- and covers less household services than other states. It doesn't help, for example, that South Carolina has more than 60 sales tax exemptions that could generate $1 billion a year in tax revenue if they were off the books. Also importantly, the state's

corporate tax base has shrunk

6.6 percent so that corporations are paying less of the cost of government services.

"There's definitely a shifting of the tax burden that's been going on for the last 10 years," said State Revenue Department Director Burnie Maybank.

Internet/catalog sales. The state is missing up to $395 million in sales taxes revenues because people have shifted to buying things through the Internet and catalogs. Maybank says the number is much lower -- about

$80 million -- but agrees the tax structure is set up to make it tough to collect taxes from these sources.

Seniors. According to the study, seniors in South Carolina get tax breaks that exceed the average. Meanwhile as a group, the growing elderly population will cost the state more to provide services in future years. The continued costly growth of Medicaid, for example, poses the biggest threat to the budget because it squeezes money from other programs, Maybank says.

Brackets. The state's top tax bracket is $12,300, which means most people's incomes are taxed at the same levels. Because brackets don't reflect a real cross-

section of incomes, lower income people end up paying more than their fair share.

What's happening in South Carolina, much like at the federal level, is that people want government to perform, but they want to pay less.

"They haven't modernized the tax structures, but people expect schools to have computers and they expect hospitals to have MRIs so the costs of services that states are providing are going up," said report co-author Liz McNichol.

Options to reduce the risks from a structural deficit in the future include:

Removing sales tax exemptions, which will increase the sales tax base.

Close corporate tax loopholes.

Stop giving income tax cuts, especially to the rich.

Eliminate tax breaks based on age, but consider them based on income.

Simplify the sales tax structure to make it easier to collect sales taxes on Internet and catalog sales.

Conduct longer-term projections on spending and revenues, including growth in cost of services.

Lawmakers need to wake up to budget realities and resist the urge to try to give people something for nothing.