Scoppe: Is our poster child endangered?

Associate EditorJuly 14, 2013 

Scoppe

— LEGISLATORS worked themselves into such a tizzy over the prospect of the Supreme Court stepping in and doing the job that they have utterly refused to do that I’m not sure they fully appreciated what the court said earlier this year when it declined to fulfill their nightmare.

Granted, the decision in Bodman v. South Carolina was bizarre.

It was bizarre because the court agreed to hear a case that said the sheer number of sales tax exemptions made them unconstitutional, and then it ruled unanimously that the suit was without merit because … it argued only that the sheer number of sales tax exemptions made them unconstitutional. That is, every justice rejected the plaintiff’s case not because the defense obliterated it but because it was what he had argued when those same justices agreed to hear it.

It was bizarre because the first decision the court almost always makes is whether a plaintiff has legal standing to sue — a requirement that has prevented the court from acting on numerous occasions to reign in a Legislature that was clearly violating the constitution. But in this case, after spending three pages analyzing the standing issue, the court suddenly aborted its analysis and declared that it need not decide that question “because even if Bodman does have standing …, his claims fail on the merits.” (Associate Justice Costa Pleicones refused to be party to this, writing separately that the plaintiff lacked standing and that he therefore concurred only with the result — denying the claim.)

But those bizarre aspects only made the court’s message to the Legislature all the more clear: Get rid of your poster child for bad tax policy — the $300 sales tax cap on cars and yachts and jets — or we’ll do it for you.

The cap, instituted in 1984 when the Legislature raised the sales tax to 5 percent and sent auto dealers into their own tizzy over losing car sales to Georgia and North Carolina, forces someone who buys a $5,000 clunker to pay the same $300 sales tax as someone who buys a $250,000 Bentley. That’s a 6 percent sales tax on people who buy used cars, and a 0.1 percent tax on people who can afford a car that costs more than most South Carolinians’ homes.

With the exception of people who sell cars and yachts and jets, and people who accept campaign donations from people who sell cars and yachts and jets, everybody understands that the cap is crazy. Even most people who benefit from the cap understand that it is the definition of an unfair tax policy.

A rational and fair way to tax automobiles, by the way, would be to eliminate the cap, and either raise more money or else tax them at 2.25 percent to raise the same amount. Or to turn the cap into a ceiling and exempt everything below $19,000. The latter would serve the public purpose of making our tax code a little bit less regressive.

Clearly, the fact that a tax is embarrassingly regressive does not alone make it unconstitutional; many parts of our tax code are regressive. Neither does the mere fact that it is blatantly unfair; again, many parts of our tax code are unfair.

In fact, it’s not clear to me at what point bad tax policy crosses the line and becomes tax policy that is so arbitrary, so totally unhinged from any legitimate state purposes, that it violates the equal protection clause of the constitution. But at least four of the five justices seem to have decided that this one is.

Technically, the decision doesn’t say that. It simply says that since the problem was that the plaintiff refused to argue the merits of each tax exemption — that is, the suit failed because it was so poorly conceived — “nothing in our opinion today should be construed as precluding a challenge based on the content of individual caps and exemptions at a later date.”

But it was striking that the court would make a point of making that point. More striking: The sales tax code includes about 110 exemptions — and one cap. You wouldn’t expect the court to take the time to specifically mention a cap — that is, to single out one of the law’s more than 100 carve-outs — unless the cap was in its sights.

If that’s not clear enough, there’s Chief Justice Jean Toal’s concurring opinion, which reiterates the “not precluding a challenge” point, notes that several exemptions “could not withstand even a minimal level of scrutiny under an equal protection analysis” and then singles out one: the $300 cap.

Ms. Toal, who was a member of the Legislature that created the cap, noted that it “had a rational basis connected to a legitimate governmental purpose in 1984.” But since Georgia and North Carolina long ago abandoned their caps, she wrote, the cap now has “outlived the intended purpose of making South Carolina competitive with neighboring states.”

Even legislators acknowledge they need to tackle the multitudinous problems with our Swiss cheese sales tax code, which exempts twice as much consumer spending as it taxes. They just never seem to get around to doing it.

Now, while we’re waiting for the next lawsuit to drop, would be a good a time to do that. At least to the poster child, whose days are so clearly numbered.

Ms. Scoppe can be reached at cscoppe@thestate.com. Follow her on Twitter @CindiScoppe.

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