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KEEP AN EYE ON THESE

Throughout December, lawmakers pre-filed their bills for the 2014 legislative session – 102 in the Senate and 83 in the House. It’s extremely difficult to predict which bills will be taken up and debated, and many excellent bills are unfortunately ignored. Some bills deserve attention on their merits, though – here are ten of them.

(Bear in mind that bills proposed but not yet voted on in last year’s session are still in play for the 2014 session. For our analysis of bills from the 2013 session, other 2014 pre-filed bills, and bills as they come in through next year, click the 2013-14 Legislation tab, under our Research tab.)

Eliminating the Individual Income Tax

S.901 would gradually eliminate South Carolina’s individual income tax over a five-year span by reducing each bracket’s rate by 1.4 percent each year, starting in 2015 until all brackets reach 0 percent. Currently, six brackets of income are taxed at higher rates as the income levels rises. At a top rate of 7 percent on income just over $14,000, South Carolina has the highest marginal tax rate on the lowest level of taxable income in the Southeast (third in the nation), and the thirteenth highest income tax rate in the nation.

South Carolinians would see substantial tax relief right away starting in 2015, since roughly $570 million would be kept in the pockets of citizens rather than redistributed to the state coffers (the state is collecting roughly $2.8 billion in individual income tax for the 2013-14 fiscal year, and under this legislation rates would be cut 20 percent each year starting in 2015). Put differently: in the 2019 fiscal year, once the tax is eliminated completely, South Carolinians would keep nearly $3 billion that would otherwise be spent by Columbia politicians. The money left in the private market would give people the power to save, invest, or spend this in manners they choose and give businesses the opportunity and incentive to hire more people and provide higher paying jobs. Moreover, there are plenty of state agencies and programs that can be cut (e.g. the Dept. of Commerce, Dept. of Agriculture, and many administrative functions of the Depts. of Education and Health and Human Services) in order to make up for the cut in income to the government – less income, less spending.

And since many businesses pay these individual income tax rates rather than the corporate tax rate, eliminating this tax is necessary to compete with other states that are lowering their taxes. South Carolina simply can’t compete with other states with its current “economic development” strategy of high taxes for most, and hand-outs and incentives to specific companies they choose to “recruit.” Currently, seven states don’t have a personal income tax, and in the 2013 legislative year, 18 states – many in the South and Southeast, lowered taxes. That would include North Carolina, which just cut its personal income tax rates from 7.75 to 6 percent to a flat rate of 5.75 percent. Under S.901, South Carolina’s top tax rate in the first year of rate decreases would be 5.6 percent – slightly lower than our northern neighbor’s.

In short: eliminating the individual income tax means more money in citizens’ pockets, more opportunity for job creation, smaller government budgets, less government intrusion in the economy, less government power in general, and therefore more freedom for South Carolinians.

Another State Pre-K Program

S.834 would create the Child Development Education Program, a new full day 4K/preschool program that would be available by 2015-2016 to all “at risk” children in public school districts. Within five years of its implementation the program would be expanded to cover all children in public school districts. South Carolina already has multiple publicly funded early education programs, among them the Head Start and the Child Development Education Pilot Program; there is no need for more. State-financed early education to date has produced little to no lasting benefits for children who participate. If legislators wish to improve education outcomes they should instead look to increase choice in education.

Transferring Excess Revenue to Highway Fund

H.4380 would limit annual state budgetary appropriations to the amount of state revenue forecast by the Board of Economic Advisors (BEA) in its February 15 forecast beginning in fiscal year 2016. Typically revenues exceed this forecast, and this bill would require that all revenues in excess of the February 15 forecast be credited to the state highway fund. We have documented similar attempts before to divert revenue directly to highway funds. What makes this attempt more culpable than others it is that it comes after a year when the legislature transferred $50 million to a state transportation agency so that it could bond it into $500 million. Ultimately, all fund transfers are merely a band aid for our state’s crumbling infrastructure. The problem of infrastructure maintenance won’t be solved until the legislature the perverse prioritization of new construction over road maintenance.

Refunding the Certificate of Need Program

S.845 would refund the state’s Certificate of Need program (CON), which was vetoed by the governor in the last legislative session. The CON program is a one in which people in the health care industry must get special permission from government bureaucrats in order to build health care facilities, expand existing ones, purchase certain medical equipment, or even add a certain number of beds. The CON program is another unnecessary government intrusion on our state’s health care system; it has done nothing to significantly make health care cheaper or more effective.

Eliminating the Education Oversight Committee

H.4352 would eliminate the Education Oversight Committee (EOC) and devolve many of its functions to the Department of Education, and some to the State Board of Education. The EOC is a hybrid committee consisting of lawmakers and leaders from the business and education industries, making it unaccountable to voters. Devolving its duties to the Dept. of Education, which is headed by the State Superintendent, would make education decisions more accountable to South Carolinians. This could have major implications on the decisions over standards and assessments, including Common Core.

Allowing out-of-state insurers to offer health insurance 

S.886 would allow the Department of Insurance to authorize out-of-state insurers to offer health insurance plans in South Carolina. These plans would not be subject to the rules and regulations for health insurance in South Carolina but would continue to be subject to the regulations from the insurer’s home state. While far from a panacea for the state’s health care problems, this reform would introduce some much-needed competition into the insurance market and thereby help to drive down costs.

Requiring Legislative Approval of Academic Standards in Some Cases

S.888 would require approval by a Joint Resolution of the General Assembly for revisions of, changes to, or new academic standards not developed by the State Department of Education – in addition to the approval by the State Board of Education and the Education Oversight Committee (EOC), as current law requires. At the very least, this would give parents (and voters in general) more influence on the education standards of their children since their lawmakers – who can be held accountable to their constituents – would play a role in establishing the standards.

Unfortunately, much of the decision-making power would still be left with the two entities that aren’t directly accountable to voters: the State Board and the EOC. (Read more on a bill that would eliminate the EOC here). Moreover, there can be ambiguity regarding which standards are “developed” by the Department of Education, and thus, which standards would need legislative approval. For example, the Department of Education could always develop standards that mirror those of Common Core in order to keep getting federal No Child Left Behind waivers and federal Race to the Top funds that come with standards that fit those criteria.

Instead of piling on different layers of approval mechanisms that spread thin the accountability through putting these decisions in the hands of the executive branch, legislative branch, and hybrid boards, the power over academic standards should be clearly given to one official, branch or another.  Once the power is given either to a statewide executive (the state superintendent) or solely to the legislature, voters will finally know who exactly to hold accountable.

Sales Tax for Internet Retailers

S.870 would make internet retailers who make at least $10,000 from South Carolina consumers in a given year responsible for collecting and remitting sales tax on these purchases. Retailers who meet these criteria would also have to obtain a retail license. However, this bill exempts retailers that own, lease, or use a distribution facility in the state – code language for Amazon – and any other future companies the state’s elected officials choose to exempt from the law in order to attract their business.

If the sponsors of the bill were serious about “broadening” the tax base, it wouldn’t carve out a special exemption for retailers like Amazon – to which the state doled out tens of millions of dollars in incentives and gave a sales tax exemption to just to bring the company to our state. Instead, S.870 would keep Amazon’s special break and force other internet retailers – whether they’re stationed in Maine, Oregon, Hawaii, or elsewhere – to collect and remit sales tax to South Carolina and obtain a state retail license. This doesn’t appear to be a real attempt at creating tax fairness: instead, it looks like an attempt at both safeguarding one company at the expense of others and creating another revenue stream for state lawmakers.

Skirting Infrastructure Project Prioritization

H.4376 would allow the Board of the Department of Transportation to add a project to the State Transportation Improvement Program without going through the deliberative process required by state law if the board finds the project would “have a substantial economic benefit not only to the area concerned, but to the State as a whole.” South Carolina’s infrastructure is already a mess because it allows agencies like the Infrastructure Bank to prioritize projects based on little more than a whim (which has led to predictable boondoggles such as the I-526 extension). Legislators shouldn’t enable more waste by enfeebling what mandatory project prioritizing and deliberative requirements still exist for the state’s chief transportation agency.

Allowing Industrial Hemp Cultivation

The United States imports an estimated $2 billion worth of hemp annually from Canada and China, but it’s against the law to grow hemp in this state and 39 others. S.839 would allow South Carolinians to grow hemp, a product of the cannabis plant which is used in producing fiber, oil, and seed products such as rope, paper, fuel, construction materials, food, soaps, lotions, clothing and more. The bill distinguishes the growing of hemp from growing marijuana (the cannabis plants cultivated must not contain more THC than allowed by the Controlled Substance Act) and creates a new penalty with a maximum five-year sentence or $5,000 fine for growing marijuana on property used for hemp production. Although the production of hemp is banned federally since it isn’t distinguished from marijuana in federal law, states are not required to enforce that law unless they are receiving federal funds to be used specifically for the enforcement of it. South Carolina would not be violating federal law by allowing hemp production.

Just as many would argue that harsh restrictions on oil and fuel production in the U.S. leaves our country more dependent on foreign oil, the same can be said in the case of hemp, albeit at a less financially significant level: the ban on its production creates the need to import this product from other countries, China for example, that own a substantial amount of America’s $17 trillion plus debt. It is hard to find the logic behind saying a product can be legally imported, but not legally produced. Moreover, the prohibition on hemp cultivation cuts U.S. citizens and more specifically South Carolinians out of this profitable industry. Our politicians love to tout their record at “job creation,” and this bill ought to appeal on those grounds. By simply removing government restrictions on the production of a very useful product, a whole new market and industry that didn’t exist before would now contribute to South Carolina’s economy.

Finally, this cash crop was grown by our founding fathers. And it’s beneficial to the environment since it can remediate soil damage and absorbs tons of carbon dioxide annually.

By South Carolina Policy Council

Since 1986 the South Carolina Policy Council Education Foundation has advocated innovative policy ideas that advance the principles of limited government and free enterprise. The Policy Council is the state’s meeting place for business leaders, policymakers, and academics – as well as engaged citizens – who want to see South Carolina become the most free state in the nation. For questions or comments on the articles on this website, please email Research Director Jamie Murguia.