TUESDAY, MAY 11, 2010
Indicates Matter Stricken
Indicates New Matter
The House assembled at 12:00 noon.
Deliberations were opened with prayer by Rev. Charles E. Seastrunk, Jr., as follows:
Our thought for today is from Deuteronomy 6:13: “Fear the Lord your God, serve him only and take your oaths in his name.”
Let us pray. Almighty and gracious God, thank You for the gift of life, and the gift of public service to the people of this State. Enhance these men and women with wisdom, strength, courage, and integrity, that they may serve You in truth and dignity. Look in favor upon our Nation, State, her leaders and all who serve in these Halls of Government. Protect our defenders of freedom at home and abroad as they protect us. Hear us, O Lord, as we pray. Amen.
Pursuant to Rule 6.3, the House of Representatives was led in the Pledge of Allegiance to the Flag of the United States of America by the SPEAKER.
After corrections to the Journal of the proceedings of Friday, the SPEAKER ordered it confirmed.
R. 193, H. 3584--ORDERED PRINTED IN THE JOURNAL
The SPEAKER ordered the following Veto printed in the Journal:
May 11, 2010
The Honorable Robert W. Harrell, Jr.
Speaker of the House of Representatives
Post Office Box 11867
Columbia, South Carolina 29211
Dear Mr. Speaker and Members of the House:
I am hereby vetoing H. 3584, R. 193, which increases the tax on cigarettes by 50 cents per pack and takes an additional $1.3 billion out of the South Carolina economy over the next decade. As in past years, this decision has not come easy as I’ve spoken with passionate
advocates whom I respect on both sides of the issue over the last several weeks.
Yet we are where we have always been. We continue to heartily back proposals to increase the cigarette tax, and we continue to insist that this tax hike be coupled with commensurate tax relief in order to fuel our state’s economy and spur job creation. And while our administration does not begrudge those in the Legislature who have – in the face of a certainly challenging budget year – been tempted to raise taxes and grow government spending, this penchant for plucking dollars from the private sector and giving them to government, we believe, represents an addiction to spending that will have long-term consequences for our state’s fiscal health.
Indeed, this addiction to spending has already had disastrous effects. After growing state government spending by an unsustainable 40 percent from 2004 to 2008, the state budget has now been whittled back from over $7 billion to around $5 billion. Yet what’s forgotten is that total state spending, including federal funds and fees paid by South Carolinians, has actually increased by 14.5 percent since 2007. So instead of following the belt-tightening lead of families across the state by doing more with less, state government has actually expanded its reach into the pockets of taxpayers and to all corners of our state.
In our desire not to raise the overall tax burden on South Carolinians, there are many tax cuts that could offset raising cigarette taxes, and our proposal has been a simple one. Reduce the personal income tax burden on working South Carolinians because better spending decisions are usually made in their houses versus the State House. Though we have made some progress on reducing the individual income tax burden on families in this state, our income tax rates continue to punish even the smallest success.
First, the current tax structure still largely resembles the same rate we had 60 years ago. At that time, former Sen. Strom Thurmond was still a freshman in the U.S. Senate and computers took up floors, not desktops. Yet, the annual median income meant that working families were near the bottom of the tax brackets. Today, we have what economist Dr. Russ Sobel calls, “the highest flat rate income tax in the U.S.”
Tax Rate / Beginning Income (1959) / Beginning Income (2008) / 1959 Brackets Adjusted for Inflation2.5% / $0 / NA / $0
3% / $2,000 / $2,670 / $14,797
4% / $4,000 / $5,340 / $29,595
5% / $6,000 / $8,010 / $44,392
6% / $8,000 / $10,680 / $59,189
7% / $10,000 / $13,350 / $73,986
As you can see in the chart above, the income triggers in our tax code have changed very little over the past 50 years, and it is demanding far more from South Carolinians than when it originally started. In 1959, the median family income was $3,821, which meant the average South Carolina family paid in the three percent income tax bracket. In 2008, the median family median income was $52,913. So, even after deductions that have been added over the years, the average South Carolina family qualifies for the highest income tax bracket. This will only continue to worsen because our tax brackets are indexed at half the rate of inflation, adding more “top earners” to our tax rolls every year. By doing nothing each year, we effectively continue to raise taxes on working South Carolina families.
Second, when confronting a budget shortfall, tax increases should be a last resort. As we offered during the budget debate last year and again this year, the effect of Washington’s stimulus solution was merely to kick the can down the road on tough decisions. While we’ve withstood wave after wave of budget cuts, the budget debate next year will be even harder as policymakers come to terms with a $1.2 billion budget hole with stimulus funds spent.
Instead, we should use this opportunity to make reforms to our government and design a leaner, more efficient model going forward that will cost our citizens less and deliver necessary services. Government already costs South Carolinians nearly 140 percent of the national average. Through a series of budget cuts, we have a government that remains larger, duplicative, and inefficient, just not as well funded.
In my most recent Executive Budget, we’ve proposed a series of measures to save $250 million. We don’t believe those are the only solutions, but they are a good starting point. For instance, if we consolidated school districts, we could put $25 million directly into the classrooms around the state. We have proposed consolidating the administrative functions of the Technical College System that would generate roughly $20 million in budget savings. Representative Garry Smith proposed closing the Commission on Human Affairs, whose functions are either or could be performed by the Secretary of State’s office. The proposal came close to being adopted by the House, but fell short by a few votes. The ideas are there and we should be working on reducing those costs first rather than demanding more from our taxpayers.
Third, tax burdens matter in being able to remain competitive in an increasingly competitive environment. With another budget hole next year, the appetite to raise taxes will become even greater. We cannot be sure where the tipping point is on tax increases, for usually when it happens, it is too late. Two examples of that are north of us on the I-95 corridor, Maryland and New Jersey. In 2008, Maryland passed an income tax increase that forced one in eight of the taxpayers to simply leave the state. According to Bank of America, the State of Maryland lost $1 billion of its net tax base as a result of the migration out of state.
Similarly, Boston College's Center on Wealth and Philanthropy released a report this year examining wealth and charitable giving in New Jersey from 1999 to 2008. The study indicated that from 1999 to 2003, $98 billion of capital came to the state due to in-migration. In the subsequent four years, New Jersey lost $70 billion in personal wealth, lowering the taxable wage base. According to the researchers, the catalyst was an increase in taxes that drove money to neighboring lower tax states, New York and Pennsylvania. The third most popular destination was Florida, where there is no income or estate tax.
Fourth, this cigarette tax increase will not solve the health care problem in South Carolina. According to the Office of State Budget, the revenue from this increase will fall short of covering Medicaid growth in less than two years. With the recent passage of ObamaCare legislation in Washington, D.C., almost half a million South Carolinians will be added to the state’s Medicaid rolls, costing state taxpayers an additional $914 million over the next decade. More comprehensive, market-based health care reform is necessary, and indeed this tax hike may end up exacerbating the current problem by pushing needed reform that much further down the road.
If the General Assembly sends me legislation that increases the cigarette tax, but offsets it with cuts in other places, I would sign it immediately. I encourage you and your colleagues to reject the notion that we can ask more from our taxpayers without delivering lower cost government and encouraging economic activity. We remain committed to working with you and the General Assembly to accomplish these goals in the weeks and months ahead.
For these reasons, I am vetoing and returning without my signature H. 3584, R. 193.
Sincerely,
Mark Sanford
Governor
Received as information.
MESSAGE FROM THE SENATE
The following was received:
Columbia, S.C., May 6, 2010
Mr. Speaker and Members of the House:
The Senate respectfully informs your Honorable Body that it concurs in the amendments proposed by the House to S.1146:
S. 1146 -- Senator Alexander: A BILL TO AMEND SECTIONS 9-1-1770, AS AMENDED, 9-1-1775, 9-8-110, AS AMENDED, 9-9-100, AS AMENDED, 9-11-120, AS AMENDED, 9-11-125, AS AMENDED, AND 9-11-140, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING RESPECTIVELY TO, AMONG OTHER THINGS, LIFE INSURANCE BENEFITS PAID BENEFICIARIES OF DECEASED RETIREES OF THE SOUTH CAROLINA RETIREMENT SYSTEM, THE SOUTH CAROLINA RETIREMENT SYSTEM FOR MEMBERS OF THE GENERAL ASSEMBLY, THE RETIREMENT SYSTEM FOR JUDGES AND SOLICITORS, AND THE SOUTH CAROLINA POLICE OFFICERS RETIREMENT SYSTEM, AND BENEFITS PAID PURSUANT TO THE ACCIDENTAL DEATH BENEFIT PROGRAM OF THE SOUTH CAROLINA POLICE OFFICERS RETIREMENT SYSTEM, SO AS TO MAINTAIN COMPLIANCE WITH THE INTERNAL REVENUE CODE OF 1986 BY PROVIDING FOR THESE BENEFITS TO BE PAID IN THE FORM OF DEATH BENEFITS RATHER THAN INSURANCE AND TO CORRECT A REFERENCE.
and has ordered the Bill enrolled for ratification.
Very respectfully,
President
Received as information.
MESSAGE FROM THE SENATE
The following was received:
Columbia, S.C., May 6, 2010
Mr. Speaker and Members of the House:
The Senate respectfully informs your Honorable Body that it has overridden the Veto by the Governor on R. 171, H. 3395 by a vote of 27 to 8:
(R171) H. 3395 -- Reps. Harrell, Thompson, Cooper, Erickson, Bingham, A.D.Young, Edge, Bedingfield, J.R.Smith, G.R.Smith, D.C.Smith, Bannister, Brady, Cato, Chalk, Forrester, Gambrell, Hamilton, Hiott, Horne, Long, Nanney, Parker, E.H.Pitts, Rice, Scott, Sottile, Stewart, Viers, White, Willis, Toole, Neilson, Bales, T.R.Young and Wylie: AN ACT TO AMEND SECTION 1111310, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE GENERAL RESERVE FUND, SO AS TO MAKE CONFORMING AMENDMENTS TO REFLECT ANY CHANGE IN THE AMOUNT REQUIRED TO BE HELD IN THE GENERAL RESERVE FUND PURSUANT TO THE CONSTITUTION OF THIS STATE AND THE RATE AND MANNER OF REPLENISHMENT OF THAT AMOUNT; TO AMEND SECTION 1111320, AS AMENDED, RELATING TO THE CAPITAL RESERVE FUND, SO AS TO FURTHER PROVIDE FOR THE MANNER IN WHICH REVENUES IN THE FUND MUST BE USED IN EACH FISCAL YEAR INCLUDING A REQUIREMENT THAT THE CAPITAL RESERVE FUND MAY NOT BE USED TO OFFSET A MIDYEAR BUDGET REDUCTION; TO AMEND SECTION 119890, RELATING TO THE DELINEATION OF FISCAL YEAR REVENUE ESTIMATES BY QUARTERS AND ACTIONS REQUIRED TO AVOID YEAREND DEFICITS, SO AS TO REVISE PROCEDURES REQUIRED TO REDUCE GENERAL FUND APPROPRIATIONS AND EXPENDITURES AND THE CRITERIA WHICH REQUIRES SUCH REDUCTIONS; TO AMEND SECTION 111495, RELATING TO MONITORING REVENUES AND EXPENDITURES TO DETERMINE YEAREND DEFICITS, SO AS TO FURTHER PROVIDE FOR WHEN REDUCTIONS BY THE STATE BUDGET AND CONTROL BOARD MAY BE ORDERED, TO PROVIDE THAT THE REDUCTIONS ARE SUBJECT TO ANY BILL OR RESOLUTION ENACTED BY THE GENERAL ASSEMBLY, AND TO ADD A REQUIREMENT THAT TO RECOGNIZE A DEFICIT REQUIRES FOUR VOTES OF THE MEMBERS OF THE STATE BUDGET AND CONTROL BOARD; TO REPEAL SECTION 1111325 RELATING TO BUDGET SHORTFALLS AND THE REQUIREMENT THAT THE STATE BUDGET AND CONTROL BOARD FIRST MUST REDUCE THE CAPITAL RESERVE FUND BEFORE MANDATING CUTS TO OPERATING APPROPRIATIONS IF A REVENUE SHORTFALL IS PROJECTED; AND TO PROVIDE FOR THE MANNER IN WHICH AND CONDITIONS UNDER WHICH THESE PROVISIONS TAKE EFFECT.
Very respectfully,
President
Received as information.
HOUSE RESOLUTION
The following was introduced:
H. 4951 -- Reps. Horne, Harrell, Knight and A.D.Young: A HOUSE RESOLUTION TO RECOGNIZE AND CONGRATULATE THE PINEWOOD PREPARATORY SCHOOL SPEED AND STRENGTH TEAM ON WINNING THE 2010 SOUTH CAROLINA INDEPENDENT SCHOOL ASSOCIATION (SCISA) CLASS AAA STATE CHAMPIONSHIP TITLE.
The Resolution was adopted.
HOUSE RESOLUTION
On motion of Rep. HORNE, with unanimous consent, the following was taken up for immediate consideration:
H. 4952 -- Reps. Horne, Harrell, Knight and A.D.Young: A HOUSE RESOLUTION TO EXTEND THE PRIVILEGE OF THE FLOOR OF THE SOUTH CAROLINA HOUSE OF REPRESENTATIVES TO THE PINEWOOD PREPARATORY SCHOOL SPEED AND STRENGTH TEAM, COACHES, AND SCHOOL OFFICIALS, AT A DATE AND TIME TO BE DETERMINED BY THE SPEAKER, FOR THE PURPOSE OF RECOGNIZING AND COMMENDING THEM ON THEIR OUTSTANDING SEASON AND FOR CAPTURING THE 2010 SOUTH CAROLINA INDEPENDENT SCHOOL ASSOCIATION CLASS AAA STATE CHAMPIONSHIP TITLE.