Last week, the S.C. Senate sent a seemingly innocuous bill to committee. Indeed, it seems to do something that very little legislation ever does —it makes sense. The bill would change a small part of the state income tax code to consolidate some of the lower tax brackets, and it would save most tax-paying citizens of the state a few dollars. Once upon a time, a different set of tax increases somewhere else would offset these cuts, but those days are long gone.
Now, as I said, this legislation makes sense on the surface. There is little doubt that most of the tax codes that Americans deal with are ridiculously complicated (mainly because of the aforementioned "cut some here, add some there" policies of yore). And there is undoubtedly a lot that could be done to ameliorate the problem. Of course, we were all with Herman Cain's remarkably simple "999" plan, which itself became slightly more complicated when someone took out a calculator and showed Cain how it was not, in fact, going to work. There is also a lot of support here in South Carolina for the very famous "fair tax" plan that aims to "equalize" the tax burden by making everyone pay a single, flat income tax rate. On the surface, these plans sound wonderful, mainly because few Americans understand the concept of progressive taxation. For whatever reason, that is not taught in middle school civics classes.
Gov. Nikki Haley, being an advocate of smaller government herself, supports the measure to consolidate the lower income tax rates. In fact, she wants to go even further and eliminate income taxes. No, not cut income taxes. Eliminate them, as in no one in the state would pay a dime of income to the state out of their paychecks. Haley says that income taxes "punish success" (because, of course, not paying taxes is how the poor reward themselves for being poor).
Unlike so many of the political class' talking points, this one might have some merit and be worthy of a discussion. In fact, there is a really good argument for the elimination of income taxes — for individuals, at least. I am not in favor of eliminating corporate taxes.
The major problem, of course, is that taxing consumption instead of income is a regressive venture. Just as income taxes "punish success," consumption taxes punish the poor by taxing necessities, and it is necessities that would be taxed when income taxes cease. Each legislative session, state Rep. L. Kit Spires of Pelion prefiles a bill that would do exactly that by ending the sales tax exemption on unprepared food because it is "fair" in his view.
Fairness is an interesting concept in the mind of the conservative. Considering that a family of four, eating moderately, spends around $10,000 a year on food, a tax burden of six percent would cost a family $600 a year. For the family with an income of $300,000, this is hardly worth mentioning. For the family whose income is $30,000, it is far more significant. After all, the sales tax would certainly need to go up to cover the loss of income tax revenue. However, there may be ways to make the inherent unfairness of consumption taxes less painful.
I would challenge Gov. Haley and the General Assembly to use the elimination of income taxes in South Carolina as an opportunity to tackle America's true economic problem: income inequality. In fact, they could easily do away with both the income tax and the minimum wage simply by passing strict controls on the maximum amount of money a person in South Carolina can take home in a year. By doing so, South Carolina could become a model for the nation.
Think about it: Let's say we decide that no person should make more than 10 times the amount that the least paid person in the state makes. Boosting the lowest paid worker's salary in this state from the minimum wage value of around $15,000 a year to $30,000 would double that person's spending power. With more people spending more money, jobs will automatically be created, and in a state where only consumption is taxed, it makes perfect sense that the goal should be to increase the purchasing power of all citizens in order to pay for the core functions of government.
Conservatives like to argue that taxation should be "fair," that everyone should have "skin in the game," and that we are "equal partners" to our national debt. If that's the case, then why not create equal partners in the pay scale? If fairness is truly the conservative drive behind low, or no, taxation, then they must step up and address the inherent unfairness existing in the state and the nation today. The only way to do that lies in exercising the power of the state to control wages and enacting a maximum wage law. It's only fair.