MY LAST NERVE: Senate Tax Hike Falters by a Few Votes

May 1, 2015

Inside Insight

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BUT THOSE “NO’S” ARE ALREADY “SOFT MAYBE’S”

The largest tax increase in state history took a second hit Thursday when the Senate voted 26-19 against setting H.3579 for special order. The Senate had previously failed to set S.523 for special order – the contents of which the Finance Committee inserted after striking all of the House language in H. 3579 – by a vote of 23-22.

But the fight is far from over, and here’s why: Assuming there will be another effort to prioritize the $800 million tax hike, only five senators need to flip their vote from “no” to “yes” in order for the motion to pass by the required two-thirds (31 senators) vote. And that’s if all 46 senators are present and voting the next time this motion is made.

Some senators may be willing to switch their vote. Speaking against the motion to set the bill for special order Thursday, Sen. Harvey Peeler (R-Cherokee) suggested that there was a group of senators from both parties working on a compromise to the bill, and that those talks had “moved some hard no’s into soft maybes.” That compromise, as Peeler described it, would look similar to the governor’s proposal – a tax swap and some form of Deptartment of Transportation (DOT) restructuring. And for that, there just might be 31 senators willing to play along.

Let’s pull back for a minute and think about why we were just five votes (or fewer) away from the largest tax hike in state history.

It’s unlikely the state would be staring down this tax increase had the governor – who had previously vowed to veto any gas tax increase by the legislature – not proposed her own “roads plan” to raise the gas tax. Her plan would have raised the tax by 10 cents over three years and cut the income tax by 2 percent over ten years, resulting in a cut to the average tax bill in South Carolina by $100 for the ten-year period. She also indicated that she wanted restructuring at DOT, but remained silent on specifics. The only thing lawmakers took away from that plan was the OK to hike the gas tax to “pay for roads.”

Hence the House and Senate plans. The House upped the ante on the tax increase by proposing a roughly $360 million tax hike next year by raising taxes on gasoline and vehicle sales. The House bill also allowed the State Transportation Infrastructure Bank (STIB) to fund more projects, maintained the legislature’s influence over the DOT Commission, and tinkered with tax brackets to provide a next-to-nothing provision on income tax relief. The Senate Finance Committee, however, went full steam ahead on tax increases – proposing more than five tax and fee increases and doubling the expected level of revenue to $800 million. Rather than propose any modest tax relief or swap, the committee passed a straight-up tax increase bill to the full Senate.

While our elected officials were busy figuring out how to raise taxes, pretend to provide citizens tax relief, and propose negligible changes to DOT, they neglected to address the real reason our roads have arrived at the state they’re in – a transportation system dominated by appointees of just a few legislative leaders that has bred corruption and waste. Had they recognized that the system of governance is itself the problem, perhaps they would have focused more on actual reform and less on spinning the system’s failures into just another excuse to raise taxes.

Jamie Murguia is Director of Research at the S.C. Policy Council, The Nerve’s parent organization.