Cindi Ross Scoppe

Scoppe: A good start — but only a start

TOMMY STRINGER describes his appointment as the House Republicans’ point man on tax policy as “really strange.”

“I had heard they were going to put this committee together, and I think they had picked most of the people, and (House Republican Leader) Kenny Bingham came up to me and said do you want to be on the committee, and I said, yeah, I guess,” the Greenville pension advisor told me recently. “And then he said, do you want to chair it? And I thought surely you can find somebody more in the leadership level than someone just finishing my third year in the House.”

He soon understood. Either the product would be yet another predictable package of tax cuts, which means it would be panned by anyone serious about tax reform, or else it would be real reform, which means it would make a lot of powerful and deep-pocketed special interests angry, in an election year no less. “I kidded people that they needed to give me a blindfold and a cigarette when they asked me this question,” he said.

Instead, Mr. Stringer went to school on tax reform. He studied what worked and (more often) didn’t work in other states, and developed a couple of driving principles that produced something more than just more tax cuts, that make the package’s many shortcomings at least understandable — and that make the package look like something more than the pure political pandering that it appears at first blush to be.

The first principle was to use Republicans’ love of tax cuts to limit opposition to the thorniest parts of the package.

Others crow about the package’s $220 million in state tax cuts (local taxes would be cut by more than $1 billion a year once it’s fully phased in), sounding at times, like the governor, as though that were the primary goal. It doesn’t seem to be Mr. Stringer’s primary goal, which is the first hint that at least he means this to be a serious reform proposal. He talks of “building in a slight revenue negativity” not as an end in itself but in order to reduce the opposition that inevitably develops toward tax packages that are revenue-neutral — that is, that generate the same amount of money for the state, even as some individuals pay more and others pay less.

He likewise explains the most obvious shortcoming of the package — its hands-off approach to the $300 cap on automobile sales taxes — in tactical terms. Mr. Stringer said that he wanted to turn the cap into a floor — exempting the first $10,000 to $15,000 of an automobile’s value, rather than taxing only the first $5,000. But he dropped that idea after his colleagues on his panel said it was too complicated (which is a nice way of saying they were afraid of angering the auto dealers), and he realized that including that change would make it easier, for technical reasons, for opponents to defeat the plan to eliminate dozens of sales tax exemptions.

Mostly, though, he figured there was little hope that anything could pass the Legislature if his panel of relatively like-minded House Republicans couldn’t come to a consensus. And that drives his second principle: Make this package a starting point rather than an end goal.

“One thing I did not want to happen was for something that volatile to divert attention away from what we were trying to do overall,” he said. “What we’re trying to do is sort of clear this perception hurdle that we cannot implement any tax reform, because once we get past that, there are other things we need to do.”

Two crucial points about that:

First, Mr. Stringer is right that there is a self-defeatist attitude in the Legislature about tax reform. When House Speaker Bobby Harrell recently explained that he wanted to try a series of individual reforms because comprehensive plans had always been defeated, I thought to myself: Defeated? When have they even been seriously proposed? But that’s part of the mindset, and in a rational world, that idea of clearing the perception hurdle makes all the sense in the world.

Second, this isn’t a rational world. The unfortunate fact is that the once the Legislature does something big and hard — and even with far-too-big revenue-negativity, this package would be big and hard — it’s not inclined to revisit that topic again for years. Sometimes decades. So passing a big tax package that tackles some sales tax exemptions but ignores the most outrageous one means the most outrageous one isn’t going to be tackled in the foreseeable future. Ditto anything else that’s ignored.

But it’s a nice theory, so let’s get back to it. Among the things Mr. Stringer hopes to get to later are not just looping back around to some of the tax reforms that are absent in this package — like the car tax cap — but also tackling spending policies that are tied closely to the tax code, or rather, to the tax code that we used to have. Topping that list are formulas that dictate how and how much money the state sends to schools and local governments each year.

Republicans don’t like those formulas because they use up a lot of tax money — and in fact the Legislature has ignored them since the start of the recession. They need changing less because they cost so much than because they’re broken. The school formula, for instance, is inversely related to property values in each district, even though state law now prohibits taxing owner-occupied homes to pay for school operations; that is, the formula no longer has anything to do with each district’s ability to fund the schools.

It’s important to understand that there is no reason to believe this package is going to become law this year. It took Mr. Stringer’s band of Republicans eight months to put it together. It won’t even make it to the Senate until late April — and even then probably not all of it — when senators will be knee-deep in budget debate. More significantly, the senators and staff who specialize in tax policy will be waist-deep in budget work from then through the end of the session on June 7.

Even if this were a perfect package, it would be unrealistic to think the Senate could pass it so quickly — and irresponsible for senators to try.

But it’s not a perfect package. It’s not even a package that’s on balance more good than bad. The accompanying editorial measures the plan against real comprehensive tax reform and finds it lacking on all three major tax classes: It doesn’t do nearly enough to make the sales tax wider and flatter, it ignores the actual problems with the income tax and instead just doles out income tax cuts, and it forces local governments to swallow the $1 billion cost of correcting flaws in the way the Legislature made the property tax, rather than either requiring the cost to be shifted among the various property tax classes or giving local governments more taxing options.

What is good about this package is that it takes a serious look at sales tax exemptions — which no one has done since a 2006 effort by Sens. Larry Grooms and Vincent Sheheen came tantalizingly close to passing the upper chamber. It seems to recognize that changes need to be made to all the major taxes in concert, rather than piecemeal. And it acknowledges some of the worst flaws in the property tax code. In short, it includes some very good building blocks for a serious reform effort. Next year.

Ms. Scoppe can be reached at cscoppe@thestate.com.

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