Lawmakers Okay with Power Grabbing Government-Funded Nonprofits?

March 18, 2016

Inside Insight

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senate bill dies

Some State House pols too busy calling citizen groups ‘liars’ to notice legislation empowering lobbyist principals

This week The Nerve wrote about an outrageous bill proposing to give the Municipal Association of South Carolina (MASC) power to collect the business license tax and even to assign the tax rates. MASC is a lobbying entity comprised of city officials who pay dues from the city coffers, but it isn’t a government agency and has no accountability to the public. In a nutshell, taxpayers have no choice about funding the MASC’s activities and no control over them.

That could get worse. If lawmakers can allow a publicly funded entity (but not a governmental entity, hence an accountable one) to collect taxes, have access to private tax returns, and even play a role in assigning the tax rates to businesses, then there really isn’t much they can’t do.

The state’s business license tax is deservedly among the most hated by business owners because it’s imposed on receipts, not just income; the classifications seem arbitrary; and many business owners have to pay the tax in multiple cities for no good reason. Even more insulting is the requirement that many have to produce their tax returns at city hall.

Small wonder businesses are up in arms. Lawmakers even talked about getting rid of it this year, or at least reducing it. They didn’t, instead choosing to introduce a bill that made some positive changes. Read more about that here.

How could such an outrageous bill pass? Because the flow of information inside the State House is almost always limited to lobbyists and government (often both at the same time). And that information is, to be generous, often disingenuous. The talking points released by the MASC were no exception. The bill giving power to the MASC was gently titled the “Business License Standardization Act,” and the power grab by a lobbying entity controlled by local government officials was presented as “streamlining” and “standardizing.” Even more absurd, all of it was said to “meet the goals” of businesses.

But what of the reform bill? It’s nothing extraordinary, but it would at least provide a fairer taxation system. Naturally, then, MASC calls it “not business friendly” because it gives an “unfair advantage” to some businesses by not making them pay the tax if they don’t actually own a business located within the city. Since the flat tax is a “one size fits all” system, it’s apparently “not business friendly.” And since the reform bill grants the authority to administer the tax program to the state’s Department of Revenue instead of a private lobbying association, it’s made to sound like it punishes businesses.

Click here to see MASC’s highly questionable “fact” sheet.

If you’re expecting outrage in the State House, you’ll be disappointed. Senators didn’t have time to challenge the MASC’s information. They were too busy slamming a private entity that isn’t funded with public money for alerting their members about the dangers of the current slew of ethics proposals. Of course, we at SCPC have been researching and reporting that information for several years – nothing the South Carolina Americans for Prosperity has said publicly is new. In fact, according to their newsletter, SC-AFP got much of their information from SCPC’s work.

Senators mostly avoided specifics, focusing instead on calling AFP’s director a liar, and said the information they were sharing with their members was “smut.” Yes – smut – as in obscene or lascivious talk.

Apparently no one is nearly as concerned about giving taxation power to a lobbying entity as about the gall of a wholly nongovernmental, non-publicly funded organization to inform their members about fake ethics reform. (Which, in fact, is pretty much all there is over at the Statehouse. Read more here).

No one challenged specifically the content of what AFP said – just the overall outrage with which they said it.

Meanwhile, no outrage about giving taxing power to a lobbying group, or challenging their talking points. Is it any wonder our state is the most corrupt in the nation?

Ashley Landess is president of the South Carolina Policy Council, The Nerve’s parent organization.

  • Saul

    Your logic seems flawed, I read HB5109 and it does not appear to grant the MASC the powers you claim.

    41-4-190(B)(2) states “The business license tax must be computed based on the gross income for the calendar year preceding the due date, the business’ twelve-month fiscal year preceding the due date, or on a twelve-month projected income based on the monthly average for a business in operation for less than one year. The tax for a new business must be computed on the estimated probable gross income stated in the license application for the balance of the license year. A business license related to construction contract projects may be issued on a per project basis.”

    Since the exact formula is provided in law to set the rate how is this power also granted to the MASC?

    It appears to me that the only thing MASC is being asked to do is serve as a one stop shop for license payments. This would at least appear to be pro business in that it would allow for businesses with multiple licenses in multiple counties to go to one site for all payments.

    “Each county must provide access to businesses for the reporting, calculation, and payment of business license taxes through the South Carolina Association of Counties Business License Tax Portal, subject to the availability and capability of the portal.”

    You need to better explain the exact language of HB 5109 you oppose if we are to believe your conclusions.

    • colnzgprnts

      Saul, even if you are correct that MASC would only be a third party calculating tax payments ( and I neither accept nor reject that it is as simple as you state) why would local government hand this over? MASC is neither elected nor does it have accountability to the town collecting the tax nor to the the owner of the business.

      What recourse would the owner have if the calculation was mishandled. This seems like the quintessential ‘big government’ centralized bureaucracy. As MASC grows more intrusive in local government, local governments slowly lose their identity and ordinances become more standardized. Village A looks to what Village B wrote in to their statutes and Village B takes a similar stand because of ‘precedent’. Then it quickly follows that Village C and D do the same thing with small incremental changes which further erodes concepts once considered constitutional.

      • Saul

        Where did I say MASC would be “calculating” tax payments? The only thing I can discern from the legislation is that the MASC portal would serve as a one-stop shop for people to make payments. Plenty of government agencies already use 3rd parties for billing, why would this be different?

        How on earth do you jump from MASC facilitating payments to them somehow being the driver for local ordinances? Be careful…your tin foil hat is showing.

        Before you respond how about you go read the legislation and come back with some specific examples of what you oppose.

      • Marion1

        “Local government?” “their statutes?” The last time I checked, there was federal and state governments and the Congresses of each are the only ones who can write law. Never mind that our Constitution prohibits “local law” and “no local licenses.” So, what happened to the DOR? Now people have to have federal, state, county and city licenses?…Americans are to blame for everything they gripe about.

    • Paul

      You really don’t know what they hell you’re talking about. The MASC bill was a compromise between Rep Quinn and the state Chamber of Commerce. It addresses a number of longstanding issues with business licenses throughout SC including definitions, common renewal dates, and much more. MASC is only being asked to create a portal for business license renewals, and is preferred to the SC Dept of Revenue taking it over – preferred by most municipalities that I’ve worked with.
      That said, The Nerve and SCPC, are completely lying when they write that the MASC will set rates. This is absolutely false!! The municipalities for which the license is being renewed will set the rates. Businesses have been begging for commonality in rate classes and definitions and that’s what this bill does. Local governments look to the MASC, and others for guidance on best practices and the legislature leans on the MASC to serve local governments by creating common approaches to common situations. It does not, however, restrict local governments from adding/making their own tweaks to better suit their needs, but it does help give guidance to local governments who request such help.
      Clearly there is much more going on here between the SCPC and the MASC, more likely the SCPC is upset that legislatures are listening to the MASC rather than them. Oh, and by the way, the MASC is a non-profit set up and run by local elected officials, works very closely with all levels of government is highly responsive to elected leaders.

      • paul

        the “you don’t know what you’re talking about was to the author, not “Saul.” Thanks P.