The Brack Report

By Andy Brack

Next year could prove to be the year that South Carolina completely leaves the mainstream, if it has even been there in recent times.

If lawmakers go through with two major policy shifts in 2006, the Palmetto State may become the unruly teenager of states.

First is the hullabaloo surrounding property taxes. The squeaky wheels around South Carolina have gotten worked into such a froth in recent years that state lawmakers seem to be trying to outdo each other to give them what they want—lower property taxes.

Never mind that altering the state’s tax structure radically could wreak long-term havoc, particularly on lower- and middle-class taxpayers.

Never mind that it would leave the state in the uncompetitive business position of having one of the nation’s highest sales tax rates, even though property taxes would be among the lowest.

Lawmakers still have a way to go to resolve differences on how to cut property taxes, but few seem to be focusing on the inequities that will be created if they shift how governments get money to provide services.

Not only would boosting the reliance on sales taxes heighten instability in the system, but it would also shift more of the burden to lower-income taxpayers.

According to a fresh analysis by The Post and Courier, the plans being considered by the House and Senate would “give the lion’s share of the benefits to those with pricey real estate, while owners of the least-expensive homes could wind up paying more tax instead of less.”

The analysis showed for every dollar in relief received by the owner of a $100,000 home, the House plan would provide $21 in relief for the owner of a million-dollar home. Under the same scenario with the Senate plan, the million-dollar homeowner would get almost $46 in savings to every dollar saved by the $100,000 homeowner.

If state lawmakers don’t slow down and look systemwide on how tax shifting will cause big problems, future lawmakers will inherit a tax structure filled with holes.

In the second policy shift, Gov. Mark Sanford continues to push for Medicaid changes that would privatize the state’s current program into “personal health accounts” that don’t exist in the marketplace.

Earlier in the year, Sanford and his cronies asked the federal government to overhaul the Medicaid program to save money. But they did it just a few days after the legislative session without really informing lawmakers, which raised their ire.

In the months that followed, Sanford tinkered with the plan and left children out of the planned changes, but critics worry the plan remains risky and theoretical and may cause costs to rise because of increased private bureaucracies needed to manage the privatized accounts.

More importantly, there is a great fear the 850,000 Medicaid recipients in the state, most of them among the state’s poorest, will get less health care in the future rather than a system that controls costs better.

Both of these proposals seem to fly counter to the old axiom: “You can’t get something for nothing.”

With property taxes, lawmakers want to give cuts without fully understanding the mayhem they could cause systemically.

With Medicaid, the governor and his team want to save money without understanding the state’s most vulnerable will probably suffer more.

Perhaps state lawmakers should consider another old political axiom: “When in doubt, do nothing.”

That course of action would do more to protect lower-income South Carolinians than radical changes proposed for property taxes and Medicaid.

Andy Brack is editor and publisher of the S.C. Statehouse Report (www.statehousereport.com), a forecast of business developments in the South Carolina Legislature and state government. E-mail him at brack@statehousereport.com.

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