HERE’S WHAT you need to know about the roads plan the Senate finally passed on Thursday:
▪ It includes the most important of the three changes needed to allow the governor to control the Transportation Department.
▪ It almost certainly steals much less money from everything else in government than it appears to — and very likely will generate more road funding than the House plan.
▪ The tax breaks in the bill are pretty good ones, and there’s one smart change to the gas tax that isn’t in the House bill.
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▪ It offers South Carolinians the opportunity to claim tax relief equal to what we would pay in added taxes and fees.
I prefer almost everything about the House plan, but the fact is that the governor would veto that bill because it includes a net tax increase, and the Senate wouldn’t be able to override the veto. If the Senate bill were to pass the House, its tax-neutrality should make it acceptable to him, and even if didn’t, it looks like the Senate would be able to override a veto.
I’m not suggesting the House should accept the Senate bill, although it should amend its own bill to give negotiators more room to reach a good compromise. But the happy fact is that this year’s Senate bill is exponentially better than last year’s.
The bill does steal money from the general fund to help pay for the tax cuts that allow South Carolinians to claim tax relief equal to the additional taxes and fees. But before we talk about the theft, let’s examine that convoluted sentence.
The important terms are “South Carolinians” and “allow,” because the bill does not actually reduce taxes by as much as it raises taxes and fees. What it does is protect South Carolinians from being hit with a tax increase that offends them — which should satisfy anyone whose goal is representing their constituents, rather than satisfying the demands of out-of-state puppet masters who are determined to dictate our tax policy.
I don’t think we should take any money out of the general fund to pay for roads, but until we come up with another way to do it, the general fund is at risk every year.
First, it provides up to $603 million in tax relief; that’s equal to the higher taxes and fees that South Carolinians are expected to pay (out-of-state motorists are expected to pay another $187 million).
Second, only part of that tax relief is automatic: More than half is for refundable tax credits that supporters are counting on most people not bothering to claim. (People would have to file an itemized list each year of fuel purchases and routine vehicle maintenance.)
There’s nothing unusual about tax credits going unclaimed. People who choose not to itemize throw away their charitable deductions and home-interest deductions. And under the Senate bill, people will have to decide whether to keep track of their gas receipts and claim the tax credit. If they don’t, they’re probably not particularly concerned about paying that extra dollar or two every week for gas.
The rest of the tax relief likely will be delivered, but unlike proposals to cut income tax rates, much of it is targeted to lower-income residents — who, as Gov. McMaster noted, will be affected the most by a higher gas. More of them could claim a refundable two-wage-earner tax credit, and they could claim an earned income tax credit and a larger refundable college tax credit, targeted to low-income students. Even the tax cuts that don’t go to the poor are good policy: They effectively lower the too-high assessment ratios for property taxes on business personal property and on manufacturers.
Assuming supporters are correct about most people not claiming the gas tax rebate, the bill will steal only $160 million a year from the general fund, rather than the $450 million a year that a summary shows. I don’t think we should take any money out of the general fund to pay for roads — or do piecemeal tax policy — but the fact is that until we come up with another way to do it, the general fund is at risk every year.
The other flaw in the Senate bill is that it falls short on reform. There are three problems that need fixing: The legislators from each congressional district have to approve the governor’s nominees for the Transportation Commission, rather than the entire Legislature or Senate; those delegations get to reject the nominees without ever taking a vote, so no one has to admit to blocking an appointment; and those same small groups of legislators must give their permission for the governor to remove his appointees. The House bill eliminates all three problems. The Senate bill eliminates the worst of the three: legislators’ ability to prevent the governor from removing his appointees.
On the purely positive side, the gas tax will be indexed to inflation after it is phased in. If that had happened the last time the gas tax was increased — in 1987 — we wouldn’t be having this debate, because the tax would be 36 cents a gallon instead of 16.75.
It’s possible that the House and Senate won’t reach a compromise on their competing bills, and even if they do, it could contain something that’s not in either body’s plan — and that something could be awful. But we’re starting at a better place than we did a year ago — and far better than I ever imagined we would.
Ms. Scoppe writes editorials and columns for The State. Reach her at firstname.lastname@example.org or (803) 771-8571 or follow her on Twitter or like her on Facebook @CindiScoppe.
By the numbers
Raises gas taxes and related fees by $520 million a year. It does not include any tax relief, so all that money would go to roads.
Raises gas taxes and related fees by $790 million a year. That could be reduced by up to $150 million, if enough South Carolinians ask for rebates on gas purchases and vehicle maintenance, leaving $640 million to spend on roads.
If everyone claims that rebate, state revenue for non-road expenditures would be reduced by $296 million, but supporters and opponents are certain this won’t happen.
The bill reduces non-road revenue by another $157 million: $46 million to give a non-refundable earned income tax credit for lower-income tax filers; $19 million to allow more people to receive a non-refundable two-wage-earner tax credit; $10 million to increase the state’s refundable tuition tax credit that college students who don’t receive merit scholarships can receive to go to a technical or four-year college; $46 million to reduce manufacturers’ property taxes; and $36 million to reduce property taxes paid on business personal income..