A Short Reflection Upon Myths and Bad Tax Policy
Let’s start with a basic principle of taxation and meteorology – revenue windfalls are a myth. A magical wind does not blow through a magical tree outside the Governor’s office from which fall new state “revenues.” The only magic we see at the statehouse occurs over at the Department of Revenue when they turn “taxes” into “revenue” a process more like that found in an abattoir than in a David Copperfield show.
We have a tax surplus not a revenue windfall. Late last year our state Board of Economic Advisors certified the tax surplus at around $1 billion. Roughly half of the surplus comes from sales tax collected from people who bought stuff and the other half comes income tax collected from people who make stuff. The BEA certified that part of the surplus should be expected again next year. They call this “recurring revenue.”
In the House, we are set to debate a 2016 – 2017 General Fund budget that includes the current tax surplus. During our debate, we will decide what to do with the surplus. Road repair, income tax cut, education needs and many other options will be considered.
In the Senate, they have been playing egg toss with a road-funding bill passed by the House since last year. After they received our bill, the Senate Finance Committee voted to strip away our DOT reforms, income tax relief and add a massive increase in the gas tax and other fees.
The Senate GOP Caucus responded that it would only support a Reform-Relief-Revenue approach similar to what the Governor had proposed and was supported by some conservatives in the House. As late as last month, the Reform-Relief-Revenue approach was still supported by many Senate Republicans.
Now we hear that all GOP Senators want to put South Carolina taxpayers on the hook for $400 million a year going forward from the General Fund to bail out the DOT with no significant reforms of its structure and no tax relief for our workers. This new big idea ignores that 30% of gas tax revenue comes from out of state visitors and confuses revenue streams within the General Fund. While this idea may make good election year headlines, it is just plain bad tax policy. Even worse, it makes our workers pay more.
I really wish we had a magical revenue tree or a flock of magical geese in the bottom of the Statehouse laying golden eggs, but we don’t. All we have is a GOP controlled Senate that just laid a huge $400 million easter egg, brightly dyed in blue and red but with a whiff of turkey about it.