Income Tax Credits — Like ‘Crack’ to Republicans

April 8, 2010

Investigative Reports

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The NerveThe way state Rep. Gilda Cobb-Hunter sees it, South Carolina Republicans liken handing out tax credits to crack cocaine.

“It’s almost like tax relief in this state has become some kind of crack for people because they can’t get off it,” the longtime Orangeburg Democrat said late in the evening of March 17 during the House’s marathon debate on the budget for the fiscal year that begins July 1.

Noting that “for the most part, those of you who call yourselves Republicans have not seen a tax break you don’t like,” the vocal lawmaker introduced an amendment that would have placed a moratorium on all tax credits – individual and corporate – offered after Jan. 1, 2006.

“Just like somebody who is addicted, sometimes there is an intervention that becomes necessary,” Cobb-Hunter said on the House floor. “The intervention here is simply a suggestion that we put a moratorium on all of these tax credits and all of these breaks that we’ve given people.”

The freeze would have been effective July  1 for 23 categories of tax credits, including some things that Democrats usually favor, such as clean energy.  Among other things, the proposed moratorium would have covered tax credits for:

  • All corporate income taxes for 10 years for manufacturers and other eligible businesses that create and maintain at least 100 jobs.
  • The installation of fire sprinkler systems in homes or businesses.
  • The purchase or lease of plug-in hybrid vehicles.
  • The purchase and installation of solar energy systems.
  • Toxicity testing by manufacturers of waste water generated at their plants.
  • The cost of pre-marital preparation courses, with a $50 cap.
  • The cost by meat packers, butchers or processing plants of processing deer for donation to a charitable organization that feeds the needy, with a $50 cap on each carcass.

Cobb-Hunter’s amendment died a quick death in the Republican-controlled House, which adopted an approximate $5.1 billion general fund budget (along with another approximate $16 billion in federal and “other” funds) for fiscal year 2010-11 and sent it to the Senate.

As written, the total budget passed by the House stands at $21.1 billion. But as in years past, most lawmakers and media outlets talk about only the general fund in referring to the budget.

In an interview last week with The Nerve, Cobb-Hunter said her proposed amendment had nothing to do with the “merits, or lack thereof,” of the listed tax credits.  Rather, she said, she wanted to freeze recently enacted credits pending the results of a study of the state’s tax system by the Tax Realignment Commission (TRAC).

“We can’t afford these tax credits in this economic climate,” she said. “Let’s put a freeze until we get the study back. I think it’s a conservative approach.”

On the House floor, Cobb-Hunter, a state representative since 1992, described herself as a “fiscal conservative” member of the budget-writing Ways and Means Committee.

“I have been very concerned for some time now with what I see as fiscal irresponsibility on the part of my colleagues here in this chamber,” she said. “And what am I talking about? I am very, very concerned about us spending money that we don’t have.”

Lawmakers have to fill a general fund budget hole for next fiscal year estimated to be at least a half-billion dollars. That gap has been projected to grow to as much as $1 billion in the following fiscal year with the loss of federal stimulus money.

The value of the credits listed in Cobb-Hunter’s amendment isn’t known. Neither the S.C.Department of Revenue nor the state Budget and Control Board could provide answers to The Nerve’s inquires last week.

“Many of the credits on that list are new,” Budget and Control Board spokesman Michael Sponhour said in a written response.

More than $877 million in individual state income tax credits and another approximate $709 million in corporate income tax credits were claimed in fiscal year 2007-08, according to the Department of Revenue’s most recent annual report.

Claimed individual income tax credits ranged from $100 for the “Palmetto Capital Seed” credit to about $166 million for non-resident income tax credits.  On the corporate side, outside of the approximate $623 million in credits carried over from the previous year, the claimed credits ranged from $469 for “qualified conservation” contributions to $36.5 million in new job credits.

Reach Brundrett at (803) 779-5022, ext. 106, or rick@scpolicycouncil.com.