By Michael W. Fanning

While the ongoing recession created high unemployment nationwide, the overall rate is stabilizing and even falling — holding steady at 9.1% in the last month. Of course, in a certain Southeastern state, exactly the opposite is happening: South Carolina: home to beautiful places, smiling faces, and — increasingly — empty pockets.

Our official unemployment rate rose for four months straight before dropping a sliver in September, to 11.0%. More realistic assessments put our joblessness rate at more than 15%.

Certainly, a number of factors account for that disparity, but economists and policymakers are increasingly suggesting that one of the biggest factors is South Carolina’s unfair and byzantine tax code.

While South Carolina has one of the lowest overall state and local tax burdens in the nation (8.1% of income vs. national average of 9.8%), the way it collects those taxes almost seems designed to put most of the burden on the average taxpayer, while creating a business climate that is driving away jobs when we can least afford it.

“Almost seems,” of course, as any reference to an S.C. tax “code” or “system” of revenue collection insults the intelligence of anyone with a basic grasp of English. Essentially, there is no code, or system, or design, just a teetering Jenga tower of exemptions, special interest giveaways and nonsense regulations.

Instead of addressing the fundamental structure, our state legislators (at the behest of special interest lobbyists) continue to haphazardly pull away and add blocks with no regard for the imminent collapse.

A policy brief by the Strom Thurmond Institute on Government explained that the safest, fairest and soundest system of tax collection relies on three primary sources of revenue: sales, income, and property. By relying on these three legs, states create a stable source of revenue that is less likely prone to erratic rises and falls in the face of changing economic conditions.

Further, “each tax contributes something useful to the overall system. Income taxes make the system less regressive, sales taxes and property taxes offer more stability than income taxes, and property taxes link taxes to services that benefit property owners.”

In the 1970s, South Carolina’s tax code was a model “three-legged stool” praised by economists across the nation. Since then, however, special interest exemptions steadily chipped away at two legs of the stool (sales and income), while the Legislature chopped off the third leg almost entirely by passing Act 388 in 2006.

With the specter of a prolonged recession ahead, South Carolina stands at the precipice of disaster. The state’s general fund budget fell 22% in the past five years (while the average taxpayer’s bill has hardly fallen at all), and Moody’s recently threatened to lower our bond rating. Think of our three legs:

Despite several hikes that have raised South Carolina’s sales tax to among the highest in the nation, more than 200 special exemptions actually resulted in the state’s collecting less ($2.5 billion) than it exempted ($2.7 billion). And not to the benefit of the average taxpayer.

Only 59% of South Carolinians pay any state income taxes, creating a small base of people required to pay too large a share and at too high a rate. In fact, South Carolina’s top rate is higher even than that of states like Massachusetts.

With the passage of Act 388, South Carolina created one of the least fair and most damaging property taxes in the country. Not only has it cost the state revenue, it also shifted a burden of more than $250 million onto the backs of businesses, raising industrial and commercial property rates to among the highest in the nation. If we chase businesses and jobs away from South Carolina, who’ll be left to buy any property, anyway?

Standing on the edge of disaster, a grass-roots coalition of South Carolinians formed Roar, an organization dedicated to fighting for true, honest and comprehensive tax reform before it’s too late. Roar represents people from all walks of life and from across the political spectrum.

Roar has presented to enthusiastic audiences of Tea Partiers, liberals, Republicans, Democrats, educators, businesses, churches and community town halls. In the past 22 months, Roar held more than 220 such events and reached an audience of more than 25,000 overburdened and underserved taxpaying citizens of South Carolina.

Roar believes that South Carolina can restore a sane, responsible and stable tax code.

Roar believes that by eliminating exemptions and other special interest boondoggles, our state can lower overall tax rates, provide core services and guarantee a balanced budget. Even our policymakers know the truth.

Roar believes the plethora of commissions and committees that have studied the tax system is no longer enough, and that the moment has finally come for real, honest and comprehensive tax reform.

Roar believes that with enough sustained pressure from concerned citizens, our united voices — and votes — can finally overwhelm the armies of special interest lobbyists standing outside the halls of the Legislature and effect real and honest reform.

Over the coming weeks, Roar will present a series of articles that address the systemic problems threatening the economic prosperity of South Carolina. We will look at each leg of the stool and propose commonsense solutions to restore sanity, fairness and stability.

We will present our vision and a plan for the future: a plan that creates a commonsense tax code, not a tangled mess of special interest exemptions and regulations; a plan that fosters an attractive, secure and competitive business climate, not one that creates uncertain and unfair playing fields; a plan that returns South Carolina and its citizens to economic prosperity, not one that has pushed our state to the edge of the cliff.

It’s time for the whole state to join the Roar.

 

Michael Fanning works to promote awareness in the general public of the S.C. tax system. He speaks for Roar, a group dedicated to tax reform: www.Roarsc.com. Contact Fanning at fanningRoar@gmail.com