Putting the Goodies Back In

WHY IS OUR SALES TAX HIGH? BECAUSE LAWMAKERS SPEND TOO MUCH TIME IN COLUMBIA, THAT’S WHY

This week, as our policy analysts worked on our forthcoming annual guide, The Best and Worst of the General Assembly, we came across a tax reform bill that, we think, tells an interesting story.

At least in theory, the intent of the bill, H.4995, was noble: to delete many of the state tax code’s sales tax exemptions and bring down the sales tax rate commensurately. Now, we couldn’t praise the bill wholeheartedly because it only deleted 42 of the state’s hundreds of exemptions instead of deleting them all, or almost all.

Still, it’s a worthy idea, and it would have been fun to see a genuine debate about the state’s exemption-riddled tax code and high sales tax. Why “fun”? Because such a debate would have put lawmakers in a delicate position: On the one hand, most of them want to be seen as tax-cutters; on the other hand, they clearly enjoy the power of handing out exemptions to their favored companies and industries, and that power depends on a high sales tax since an exemption from a low sales tax doesn’t mean much.

But something kept that debate from happening. Once the bill had been introduced and sent to the Ways and Means committee, members began putting exemptions back into the bill (or, to speak more correctly, striking those lines that deleted exemptions). So, for example, books, magazines, newspapers, containers for preparing turpentine, cleaning supplies used by textile rental companies, technical equipment used by television stations, building materials used for the housing of poultry, sweetgrass baskets and gold bullion – all these had their exemptions taken away by H.4995 in its original form. But all these had their exemptions put right back into the bill.

The bill began with 42 exemptions. But by the time Ways and Means got done with it, it only had 24.

Ways and Means even introduced a couple of new exemptions on “respiratory syncytial virus medicines” and “visosupplementaion therapies sales,” whatever those are.

By the time the bill left Ways and Means and went to the floor for a vote, a weak bill had been made completely meaningless. Whereas the original bill would have lowered the sales tax rate from 6 percent to 5.3 percent – with the possibility of introducing more exemptions and lowering the rate by a full penny – the post-Ways and Means version would have lowered the rate from 6 percent to 5.97 percent.

That explains why the bill passed with a healthy majority – 63 to 39. (Read the vote tally here.) There was little controversial about it, except that it would have scrapped a few exemptions – for example, the exemption on “audiovisual masters” and “solid waste disposal collection bags.”

It also explains why another bill, H.4271 – a bill that would have scrapped almost all sales tax exemptions and lowered the rate from 6 to 3.85 percent – never even made it out of Ways and Means for a floor vote.

Here, then, is one more reason why the Policy Council favors shorting the legislative session from (see point number 3 of our 8-point reform agenda) – not because we dislike legislators and wish they would go home, but because the more time they spend in Columbia, the longer they spend with lobbyists; and the more time they spend with lobbyists, the more influence special interests have over reform legislation.

H.4995 started out as a weak but improvable bill with a reasonable aim. But because lawmakers had well over a month to “work” on it, lobbyists had plenty of time to persuade them to gut it of whatever merit it had in the first place. So much time, in fact, that what started out as a measure to lower the sales tax could conceivably have ended by raising it to make up for new exemptions.

Remember that next time you hear somebody argue that we need full-time legislators.

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