JUNE 12, 2009 -- Will they or won’t they? That’s the question being asked around Columbia about whether legislators will be able to pass a bill to create a tax realignment commission (TRAC) when they return for a short week on Tuesday.
Every few years in Columbia, there has been an attempt to revamp part or the whole state tax structure. The complaint has been that the state’s tax structure is out of whack, hampering not only education funding, but the state’s economic competitiveness.
Usually, critics have contended, the efforts have largely been about posturing and the results end up gathering dust on a Statehouse shelf. This year’s effort, S. 12, would create a commission to study and report back recommendations to the legislature by March of next year.
Spurred on by the current roller coaster “boom and bust” ride the state’s budget has been on recently – a ride that docked $1.4 billion in mid-year cuts from this year’s budget alone – there have been serious efforts behind the scenes and in front of rostrums to get something done about the state’s perceived weak tax structure.
Adding to the animus to get something done has been the deleterious effects of Act 388, the law that shifted the funding stream for public K-12 education from property tax to sales tax and led to hundreds of millions of dollars disappearing from education budgets as the overall economy has worsened.
Faced with a paucity of legislative accomplishments this year, a conference committee of three senators and three representatives will meet in the eleventh hour on Tuesday to hammer out a compromise bill, or hold the matter over for January.
Actually, they’re meeting at 10:30 a.m., and their agenda of items to discuss will either be full or slight, depending on who’s talking.
House Ways and Means chairman Dan Cooper (R-Piedmont) said the only issue was whether the minority party in the House would be able to name a representative to the 17-person commission, as the Senate version allowed.
The make-up of the commission will likely be eight non-legislative members appointed equally by the House and Senate, two representatives of the governor, and the director of the state Department of Revenue. There also would be six legislators who would serve as ex-officio (non-voting) members.
The first fight -- the scope of the commission -- was settled during this year’s session. House Speaker Bobby Harrell (R-Charleston) argued unsuccessfully for a two-stage approach, where the state’s sales tax exemptions were addressed first, and the entire structure second, to ensure something concrete would get done, unlike in years past.
Now, the entire structure would be debated wholly.
Rep. Jim Battle (D-Nichols), surprised when he was named to the committee after he voted against TRAC, said there were several more bones of contention. The first is whether the TRAC recommendations would receive up or down votes reminiscent of the federal Base and Realignment Commission.
Second, is the question of how long the commission would be in place. And third, perhaps most important, is whether the commission would have enough time in its second meeting to report out a bill.
Big questions: Staffing and independence
One of the biggest concerns outside the Statehouse by fervent onlookers is whether the commission will be able to set up an independent, professional staff of researchers to answer the questions its members come up with.
Jim Fields, executive director of the business-friendly Palmetto Institute, said an independent research office is crucial for objective answers to the state’s pressing problems. Without objectivity, according to Fields, the system will stay “out of whack.”
As proof of the tax structure’s “imbalance,” Fields said that while the state claimed $2.7 billion in sales tax each year, it left another $2.7 billion on the table through existing state sales tax exemptions.
Fields’ point may be moot, as many citizens would likely support a large portion of the existing exemptions, like household electricity, gasoline and groceries.
Fields said he understood that creating a new agency in current lean economic times could be problematic, but that the business community could be convinced to chip-in whatever amount because it would save so much and benefit so much from a saner tax structure.
Speaking for the business community, state Chamber of Commerce president Otis Rawl also applauded the creation of the commission, which he heard from his sources was a done deal.
“What we need is a balanced, dependable and predictable tax structure,” said Rawl, that funds crucial government duties like education, but at the same time doesn’t hamper the growth of industry and commerce.
Bryan Cox, spokesperson for the conservative S.C. Policy Council, said an independent commission would ensure that “certain powerful legislators would not be able to cherry pick members” to arrive at a predetermined outcome.
Cox argued against an up/down vote, as he said the state needed an “open, public debate, where arguments are aired on the floor … where a few powerful men in dark rooms can’t force down the necks of other legislators” just what they want.”
Municipal and county associations were also lobbying for the independent commission, to make sure their financial needs were included in the discussion. Reba Campbell, the deputy director of the Municipal Association of South Carolina, said she had seen several times where state political needs have trounced local concerns.
Campbell, Rawl and others said Act 388 and its millage cap has cut deeply into municipal coffers and spun off a second wave of fights this year on the floor of the General Assembly to allow counties and cities to levy higher, more market correct taxes on property sales.
Sen. Nikki Setzler (R-Columbia) said he was optimistic the bill would make it out and into the law books.
Crystal ball: The clock is ticking on TRAC, literally. If the conference committee is able on Tuesday to report a compromise bill, the legislature is only in town on a shortened sine die week. Also, if the legislature were to pass it, it would have to survive a trip across Gov. Mark Sanford’s desk. Sanford’s spokesperson Joel Sawyer said the governor’s administration would wait to see a completed bill before issuing any veto warnings.
If he did veto it, would the General Assembly return to town just to tackle this one issue? No; too much money. If the TRAC bill is reported out, if the legislature passes it and if it can survive a gubernatorial veto, nothing can or will be done on it until January, when the General Assembly reconvenes. And next year, with a spurned Sanford (read: stimulus lawsuit) and a House up for reelection, it will be a charged atmosphere.