Politicians depend on voter apathy and short memories when they slip through a simplistic solution for a very complicated problem. So let’s review what is being attempted and why it won’t solve anything except increase property taxes and add on this increase of two cents on every dollar spent for life’s necessities at a time when there is an inflation explosion on the horizon and while unemployment in South Carolina is higher then it has been in years.

• Sales tax, unlike property tax, cannot be deducted from state and federal income tax. The loss of deductions for property taxes that apply to school support (which amounts to 74% of the Dorchester County tax bill) is in effect a tax increase, all other factors being equal.
• South Carolina’s sales tax is already 40% of total of state tax collections and is above the national average without considering the 40% planned increase.
• There is no guarantee that sales tax receipts will be adequate where generous county allocations for schools are provided in hopes of better schools.

Currently the State Constitution provides local government the authority to impose property tax. Under the new proposal, counties and cities are prohibited from assessing a property tax increase relative to school taxes, unless the distribution of the state sales tax is insufficient to cover operational costs within any school district. This is an example of political double talk.

Funds would be distributed monthly based solely on the Weighted Pupil Unit (WPU) with all districts receiving the same funding per WPU. Say that an affluent school district finds that its sales tax allocation from the state treasury is insufficient to meet the already established high education standards. There is no doubt that the school district would demand new property taxes to cover the difference. Also, there is no prohibition against local governments raising taxes on small businesses and other items subject to property tax.

Currently, the State returns to local governments $410 million per year for the homestead exemption and property tax relief taxpayer organizations worked so hard over a period of three years to secure. This relief will be sacrificed for the temporary elimination of the property tax for schools, but is it a fair trade off?

The two-cent increase ($1.1 billion), pens the current homestead exemption and property tax relief ($410 million) equals $1.5 billion; $400 million more than needed. This is clearly a tax increase! Reports indicate $40 million will go to other government programs. This last tidbit calls to mind the usual question about how the legislature and the government officials act when they add on extra taxes.

The first three pennies of the five-cent sales tax were approved for support of school construction, with only the fifth penny of the five-cent sales tax actually dedicated entirely towards supporting the schools. Much of the first three cents levied never reached the school districts, but landed in the general fund to be spent for other purposes.

Sales tax, as indicated earlier in this essay, is a shockingly regressive tax for seniors and single-parent households. Senior citizens, those on limited incomes, and those who lost jobs are seeing their purchasing power dwindle. Seniors move to smaller homes as an economy measure. The picture continues to darken as each penny of sales tax increases the burden that the old property tax demanded. Social Security income is exhausted on living expenses and the increased sales tax would only limit an already limited purchasing power for those who depend on SS as a major source of income.

A recent letter to the Times Examiner by Mr. R. Edward Allen of Fountain Inn, S.C. illustrates the plight of the retired on limited fixed income.

“A senior couple retired after a half century of work and contributing into the Social Security system. They sell their family home to downsize to a retirement home. The mobile home they buy is modest, but comfortable. They buy a used vehicle 10 years old for transportation. New cars are too high to consider. The current tax on the retirement home is less than $300, way below that of their former home. Their combined Social Security income is less than $1,650 per month, which has the usual 5% or more sales tax on expenditures…even for over-the-counter drugs and food purchases.

“Gasoline tax is to be increased by 2 cents per gallon,[1] license fees and even a tax on labor for repairs is being considered by the tax gurus. Now, if the couple has a net income from investment or savings enough to raise their annual income to $20,000 and sixty percent of that income ($12,000) is spent for necessities which are taxed at an increase rate of 2% on the dollar, the couple pays $240 more in sales tax than they did before the sales tax increase.”

The couple pays a total of $248.68 toward school operation expenses less $62.17 (25%) for the S.C. property tax relief or a net $186.51 property tax for school operating costs. But wait a minute! What if one of the couple is over 65 years old and entitled to the homestead exemption? That amounts to $22.00 which reduces their total property net tax bill to $164.51. Under the propose plan the couple will lose $75.49 by voting for the 40 % ($240.00) increase in sales taxes.

Based on the track record of the legislature and other government officials, there is no assurance that the sales tax which is being proposed will actually reach the classrooms. However, all parties to this scam will be able to trumpet what they’ve done to increase the state’s contribution to the welfare of its poorer schools. Not that this is fair, but no matter, the local school boards can just reinstate the property tax!

Local governments have increased sales taxes to as much as 7%. Add another 2 cents and the total in some localities reaches a whopping 9% of every dollar spent. Local economies, such as in Charleston, are largely service oriented, consisting of waiters, bus boys and store clerks whose salaries are far below that of other industries. They can hardly afford the high rent much less the increased sales tax. However, this proposal will also increase the sales tax cap on cars to $1,000.

Speaking of high rent, what about those millionaires who, may or may not be permanent residents of the sate, and will no longer pay a modest percentage of their income for property taxes on their mansions? Yet, the average homeowner must forfeit his homestead exemption and property tax rebate for what actually may be a tax increase and pay up to a $1,000 in taxes on the purchase of a new car. Who benefits most by this legislation?

They say the increase in sales tax would pay South Carolina teachers the national average teacher salary. However, the Hoover Institution finds teachers earn more per hour than architects, engineers, scientists and nurses. According to economist Richard Vedder, who authored the recent Hoover study, teachers unions fail to account for shorter teaching workday and work year when measuring compensation. Teachers come out ahead when spring and summer breaks are factored in. Vedder also notes teacher’s retirement and health-insurance benefits are typically more generous than those of the average professional.

Take health care. Labor Department data suggest about half of teachers pay nothing for single coverage; their employer picks up the entire premium, he says, In contrast, just one-fourth of private “professional and technical” workers pay nothing.

“If direct hourly compensation averages 5 to 8 percent more for teachers than for all professional workers, and fringe benefits are perhaps five percent more,” Vedder concluded, “all told, teachers’ average hourly compensation plus benefits exceed the average for all professional workers by roughly 10 to 15 %.

Moreover, he points out, teachers have greater job security, rarely suffering layoffs or firings, which allows them to earn more over time.

American Federation of Teachers President Sandra Feldman, however, insists teachers’ salaries, at an average $43,670 nationally, are relatively low among professions. The national average for beginning teachers in 2001-2002 school years was $30,719.

While pay for beginning teachers rose from the last survey, salaries for “experienced teachers” are not showing much improvement,” she said. [That does not apply in S.C. because there is the TERI Program (The Teacher and Employee Retention Incentive), which allows teachers (and state employees) to officially retire at 28 years but keep their jobs and their full salaries for another five years, stop paying into the retirement system, and collect (although not until they truly retire) all of the pension payments that would be owed them as of their original retirement date. By allowing the senior teachers in the highest pay scale to continue past normal retirement blocks those of equal qualifications and lower pay scales to fill the slots that the “un-retired” teachers occupy. Besides that, those teachers not hired as replacements for those who are benefiting from the TERI program would not contribute to the retirement fund.

The taxpayers pick up the tab for this added expense that results from any imbalance for not only the teachers’ but all state employee retirement funds.[2]

The cost of living in South Carolina is not the same as Chicago, New York and the East Coast or the “Left” Coast or for that matter, living costs in the Southern States with certain exceptions such as Atlanta are lower than the rest of the entire country, mainly because overall wages are lower. The question then what is the justification for raising teachers’ salaries to meet the national standard which doesn’t apply to the South Carolina average taxpayer who must shoulder the increased load?

Before any effort is made to increase the sales tax, it behooves the Governor to initiate an audit of the Department of Education. A recent S.C. Policy Council analysis showed that only 48.6% of education dollars were making it into the classroom. At last, policy makers began to openly question how the education bureaucracy was spending tax dollars.

In the heated atmosphere created by the S.C. Policy Council’s report, Speaker Wilkins and numerous legislators called for an immediate audit of the State Department of Education and local school districts, to be conducted by the independent Legislative Audit Council. If conducted, the audit would look at K-12 spending and specifically analyze departmental salaries of over $50,000 per year. The Policy Council pointed out that 231 employees in the S.C. education department make more than $50,000 a year, substantially more than the average teacher is paid.

But here is the clincher that should turn off any voter…

There is a legislative intent to increase the School Operating Expense Fund annually based on the CPI. This could mean that the sales tax could be raised to maintain the fund. Therefore, when the coming inflation takes hold, expect another penny or so sales tax increase. This is the easy way for the bureaucracy to lay on the taxes at the expense of the counties who now have no control over how the money is to be spent. At least the voters in the counties could put pressure on local school districts regarding expenditures since property taxes were a factor. All the state has to do is increase the amount per weighted pupil unit and presto the money will materialize ala an increase of a penny.

Oh! The wonder of it all.

[1] This comment in the quotation is, as far as can be determined, not part of the proposed sales tax increase.

[2] It must be noted that the state legislature allows all state employees who qualify the same privilege as extended to the teachers, since no group of state employees can be discriminated. This was not supposed to happen. The intent of the TERI Program was to retain teachers, not other State employees. The SC Legislature, purposely or not, costs S.C. taxpayers an enormous amount of money in unnecessary wages.

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