Cindi Ross Scoppe

How to improve the House gas tax proposal

LET’S START with what’s good about House leaders’ road funding bill, because there’s a lot that’s bad.

H.3516 requires out-of-state drivers to help pay for the wear and tear they put on our highways, just like other states require of South Carolinians. House leaders project that out-of-state drivers will pay nearly 40 percent of the $600 million their bill eventually generates each year, thanks to the parts of the plan that raise the gasoline excise tax by 10 cents a gallon and increase revenue from out-of-state truckers.

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Legislators to consider taxing SC drivers $60 more a year for gas

SC House GOP leaders propose 10-cent gas-tax hike

Business leaders to legislators: ‘Finish the job’ on roads

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That should be an easy call. We’ve always called on people who use our roads the most to pay the most for them, and we shouldn’t abandon that concept at the state line, as we have begun to do by stealing general tax funds to subsidize road repairs and improvements.

The bill also requires hybrid owners to pay $30 and electric-vehicle owners to pay $60 each year. That $60 is the additional amount someone would pay for buying 11.5 gallons of gas a week once the gas tax increase is phased in.

People who drive alternative-fuel vehicles say we should reward them for choosing an energy-friendly alternative, and they’re right; that’s why we give them a tax break on the purchase of their vehicles. (They also save by purchasing far less gasoline.) What we’re talking about here isn’t energy policy; it’s how to pay for our roads, which they also use.

Perhaps most important, the bill could stop lawmakers from raiding any more money that’s supposed to pay for schools, courts, law enforcement, child protection and other essential services. Our state managed to go, oh, about a century without doing this, but in 2013 lawmakers diverted general fund revenue to roads; then they did it again last year. But the fact is that as long as lawmakers are determined to spend more money on roads, it has to come from somewhere. It will be stolen from the general fund if it doesn’t come from driving-related taxes.

Unfortunately, that’s the end of the good list.

Unlike the House’s 2015 bill, this year’s does nothing to improve our tax system. And we need to improve our tax system. It is such a cobbled-together amalgam of good, bad and worse tax policies that we should not make any changes — raising taxes or lowering them, adding them or eliminating them — except as part of an overhaul.

Also unlike the last House plan, this one does nothing to improve the Department of Transportation, which is still controlled by part-time board members who for all practical purposes can’t be fired and who likely will remain as parochial as ever despite changes passed last year in the name of reform.

Scoppe: Why we still need reform at the SC Transportation Department

House leaders say trying to get the Senate to swallow actual reform is an exercise in futility, at least until senators get the bad taste of our former governor out of their mouths. Although I’m not sure that analysis is incorrect, I don’t like the result a bit, and it’s why I doubt I’ll be able to support a road-funding bill this year.

But the reality is that if our best advocate, House Speaker Jay Lucas, isn’t pushing reform, we’re not going to get reform. And when the reality is that you can’t get what you want, you look for ways to mitigate the damage of what you’re getting.

There are two obvious ways to do that.

First, instead of increasing the excise tax, eliminate the sales tax exemption on gasoline. Eliminating any exemption makes our sales tax more coherent, and eliminating this particular exemption has the effect of adding an inflation factor to the gas tax, so revenue increases as the cost of paying workers and buying raw materials increases.

Second, pick a smarter way to deal with that obscene $300 cap on the sales tax for cars, boats, airplanes and other vehicles.

Under current law, someone who buys a $6,000 car pays the equivalent of a 5 percent sales tax, while someone who buys a $56,000 car pays a tax that is just 0.54 percent of the purchase price. The House bill would raise the cap to $500. So people would now pay the full 5 percent on cars that cost up to $10,000 — but someone buying a $56,000 car would still pay just 0.89 percent. That change, which would generate $70 million a year, is not much of a step toward a fairer tax.

A better way to raise that same amount of money is to eliminate the cap entirely and lower the tax rate on automobiles, so everyone pays a tax of about 3 percent on the total purchase value; that is, make it an actual sales tax rather than a fee for purchasing a vehicle. Alternatively, exempt the sales tax on the first $1,000 of the purchase price, and tax the rest of it at the normal 5 percent. That is, create a tax floor instead of a tax cap.

These changes wouldn’t come anywhere near fixing our special-interest-driven, loophole-ridden tax system, but they would move us in the right direction. And that’s better than what usually happens when the Legislature starts messing around with our tax system.

Ms. Scoppe writes editorials and columns for The State. Reach her at cscoppe@thestate.com or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.

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