If lawmakers take a hard look at their extracurricular handiwork, they will see that it will need major diagnosis and potential surgery to keep all the patients thriving -- the affluent, the middle class and the poor. Legislators shouldn't make a wrong incision that will anger their constituents more than they already have.
As state and local governments seek ways to finance the increasing demand for services, property owners want relief, but the lawmakers' obligation is to make sure that the state's tax structure is efficient and equitable.
The Palmetto Institute was formed in 2002. Its mission is to increase the wealth of every South Carolinian. In mid-November the think tank released a yearlong study it commissioned researchers at Clemson University's Strom Thurmond Institute to complete. The study recites facts and figures to back up ideas that have been floated for years. It reinforces the idea that piecemeal changes to the state's tax structure may do more harm than good.
The study calls for an independent commission to examine the state's income tax, property tax and sales tax to determine how changes in one may affect the others. The recommendation doesn't come a day too soon. The legislature is poised to make changes in the sales tax to effect a lowering or elimination of the tax on real and personal property -- homes and automobiles are the most likely to be affected. A joint Senate subcommittee agreed Thursday to send the Judiciary Committee draft constitutional amendments that would change property tax assessments and limit spending by local governments. The proposals have consequences that stretch far beyond Columbia and could have dire consequences for fast-growing counties like Beaufort and Charleston to provide necessary services that must keep pace with growth.
During an October visit to Beaufort, state Treasurer Grady L. Patterson said tax relief is no simple solution. Patterson said that as long as taxes balance out, it is OK to do some shifting. The average taxpayer might see property taxes cut in half, but a proposed 2- to 3-cent sales tax increase being considered by lawmakers is a regressive tax that will affect not only the poor but property owners as well. As Patterson pointed out, a free lunch doesn't exist. The Palmetto Institute study says essentially the same thing.
While the institute doesn't take a position on specific tax plans, facts in the study point to a need for a comprehensive study. For example, the study says that South Carolinians pay among the nation's lowest taxes. The state ranks 47th in taxes spent per capita and 42nd in personal income spent on taxes (income, property and sales), although some fees are relatively high. Tax advantages are weighted toward residents over 65 years old, which could affect the tax base as the population ages. Residents hit hardest by the state's tax structure are those who earn between $22,000 and $35,000, a range that is lower than the state's median income of $38,000 a year, according to Census data released Tuesday.
Property owners are demanding relief no matter how it must be achieved. But lawmakers could provide a lasting service by not just examining property tax relief but by scrutinizing overall tax reform in South Carolina. Examining the income, property and sales taxes -- and exemptions-- through a comprehensive effort could do much to provide the answers property owners seek.
The Palmetto Institute's recommendations of creating an independent tax study commission and providing it with the resources and data to perform the job are sound. Lawmakers should listen.