Cigarette Tax Hike Dead For the Year?

South Carolina's regular legislative session ended yesterday with no agreement on how much to increase the state's cigarette tax-- which means there will likely be no hike at all this year. In the end, what killed the proposal was the state's short-term projected budget surplus:

Raising taxes with a surplus "is simply wrong," said Sen. Larry Grooms, R-Berkeley. "When we were told 'we have the votes to go around you,' we dug in."

Of course, legitimate questions can be asked about how long that budget surplus will stick around. And for some folks, the point of a cigarette tax hike isn't to raise revenue anyway.

Our hope for next year: if lawmakers are going to decide more money needs to be allocated to health care, they should come up with a revenue source that will grow a little faster-- as virtually any other tax hike would.

The State Says "Leave the Income Tax Alone"

A sensible editorial in today's State newspaper surveys the carnage of the ongoing legislative debate over how to cut South Carolina taxes, and makes several sensible points. First, the editorial board argues that South Carolina taxes are not obviously all that high:

[N]o one has yet put forward a good argument for reducing taxes overall. South Carolina is not a high-tax state. Depending on how you calculate tax burden, we come out in the middle or toward the bottom nationally. And we continue to underfund essential services...

Second, the board argues that the income tax is the wrong tax to cut:

If they must, they should at least make our overall tax system more balanced instead of less, more fair instead of less, more stable instead of less. All of that points to cutting the most volatile, regressive and overutilized tax we have — the sales tax.

This is an especially important argument in light of the biggest tax event of the past week in South Carolina: the 1 cent increase in the general sales tax rate that took effect on Friday.

Having said that, reality intrudes-- and reality in South Carolina right now appears to be that lawmakers will either cut income taxes for upper-income families or for middle-income families. The State argues that the Senate plan is "far superior" because "all income tax payers would receive the same dollar benefit" under the Senate plan.

This is true-- the Senate's plan (which would reduce the bottom tax rate) is definitely less bad than the House plan (which would reduce the top tax rate). But low-income families who are too poor to owe income taxes will get nothing from the Senate plan-- even though these families are hit hard by sales and property taxes. For example, a single mom with one young child would have to earn over $18,000 to see a dime from the Senate plan-- well above the poverty guideline for this family.

Which is why the editorial board's ultimate recommendation-- that lawmakers should "leave the income tax alone until lawmakers are ready to undertake comprehensive tax reform" is so very sensible. Too bad no one will listen.