Last week I warned that problems on the way to passing a gas tax increase in the Senate were probably only temporary, and that there was a compromise in the works. Well, that compromise was made public Thursday at the State House with at least 20 of the 28 Senate Republicans unveiling their new plan to raise multiple taxes and fees in the amount of roughly of $800 million. Not surprisingly, the cornerstone of the plan is a tax-swap (as first proposed by Gov. Haley) and there is a throwaway shot at Department of Transportation reform as well.
Here’s all we really need to know about the plan, though: it creates one new fee, raises three existing taxes and fees, and raises the gas tax 12 cents and allows it to be adjusted for inflation (meaning it will most certainly go higher than 12 cents). Like every other plan put forward thus far, this one is about raising more revenue for the state, not about roads.
All week rumors were swirling in the capital that a handful of senators were working on a deal that would be more palatable to the governor. It had become painfully obvious that these senators were trying to reach a compromise that could get the governor’s approval, or craft such a plan that there would be enough votes to withstand a veto.
Interestingly enough, on the morning of the unveiling of the Senate Republican plan, Gov. Haley’s website was wiped of all content tied to her roads plan and replaced with unrelated content. Her website had previously featured several hardline statements regarding raising the gas tax and cutting the income tax. For instance, the “Truth in Facts” section of the website straightforwardly opposed raising the gas tax by more than 10 cents per gallon (screenshot posted here). “If we raise our gas tax by more than 10 cents per gallon,” the old site said, “we will equal or surpass Georgia’s tax level and lose our competitive advantage.” Further, the same section of the website indicated that the 2 percent income tax cut proposed by the governor would be automatic, and not subject to annual authorization by the legislature.
So why is that relevant? Because the new Senate Republican plan raises the gas tax by 12 cents per gallon and allows it to be adjusted for inflation annually (the Finance Committee version of the bill capped inflation at 2 cents per year, but it’s unclear if this proposal would do the same). Clearly, twelve cents is higher than ten cents.
In the Senate Republican plan, furthermore, the income tax cut (a 1 percent cut in each bracket over five years) would be suspended in any year that revenue doesn’t meet the projected growth of 4 percent by the Bureau of Economic Analysis. Which virtually guarantees that it will be suspended: Over a ten-year span (2003-2013), South Carolina’s compound annual growth rate (an average of economic growth) averaged less than 2 percent.
So according to the governor’s own pronouncements, the new plan would put the state at a competitive disadvantage with our neighboring state, and would fail to guarantee tax relief. That should be enough to force the governor to oppose this plan, and veto it if the legislature passes anything resembling it.
As of this writing, the governor’s office has only said she is “reviewing” the plan.
The Senate could get to the gas tax compromise bill early next week. And, given that there are only four weeks left in the session and the crossover deadline has passed (i.e. only bills that have “crossed” from one chamber to the other are still valid for this year), the bill would have to be an amendment to the current gas tax bill on the Senate calendar. More than likely the bill will be set for special order so that the Senate can get to it quickly.
However, the bill as it is now would have to be set for special order as is – that is, without the new plan being amended – thus creating the possibility of the Senate passing an even more dangerous bill than what was proposed Thursday. That’s if there aren’t enough votes for the new tax-swap plan. We’ll be watching.
Jamie Murguia is Director of Researh at the S.C. Policy Council, The Nerve‘s parent organization