The Palmetto Insider

The blog of the South Carolina Policy Council

TRAC’s Final Meeting

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The final meeting of the Taxation Realignment Commission (TRAC) was Thursday, October 28th before a crowd so large that many were ushered into an overflow room, from which they were able to hear (but not see) the proceedings. At this final public meeting, the TRAC took testimony from two final groups – the state Dept. of Commerce and the Council on State Taxation (COST) – before taking final votes on the draft reports of various subcommittees to be given in their recommendation to the General Assembly. The draft report itself is officially due November 15, three days after the self-imposed deadline by which committee members must submit their concurring or dissenting opinions to the chairman.

The first testimony taken by TRAC was from Doug Lindholm, the president and executive director of the Council on State Taxation. COST was invited to give testimony regarding some of the TRAC’s proposed recommendations. Lindholm began his testimony by expressing the sentiment that “businesses should pay for the benefits they receive from state and local government” and explained that in South Carolina businesses last year paid $5.9 billion in state and local taxes while their share of benefits was $3.8 billion. Lindholm’s testimony examined the following three issues:

  1. Combined reporting vs. separate filing as regards the corporate income tax. According to Lindholm, “Combined reporting carries severe economic consequences: it arbitrarily assigns income to a state, negatively impacts the real economy, and imposes significant administrative burdens on both the taxpayer and state.”
  2. Alternative base, or gross receipts taxes. Noted Lindholm: “Gross receipts taxes are widely acknowledged to violate numerous tax policy principles. … There is no sensible case for gross receipts taxation.” (We agree.)
  3. Fair, efficient and customer-focused tax administration. Among other things, Lindholm argued that taxpayers should be able to postpone paying a questionable tax during the period in which they bring a case before an administrative law court challenging the tax. He also advocated for better trained tax tribunal judges.

Lindholm’s entire testimony can be found here.

Following the COST report, Rebecca Gunnlaugsson, an economist for the state Dept. of Commerce, made her own report. In it, she addressed a number of important points before the commission. The two important points on which she ended her presentation were:

  1. The valuation methods for property taxes are not uniform in South Carolina and this needs to change;
  2. There are, in total, 47 exemptions for property taxes in the state, which puts different groups at an advantage over others;

The TRAC proceeded to take each of the subcommittee reports up for consideration. The first, and most visibly opposed by a large portion of the crowd present, was the draft report on the proposed Soft Drink Tax. Commissioner Kenneth Cosgrove motioned to table the report, which passed, removing the proposal from the TRAC’s final report to the General Assembly. Next, the reports on Tourism, Conformity, Fair Tax, Property Tax, and Corporate Income Tax were taken up in turn and each was adopted for the final proposal by the TRAC. The TRAC commissioners will have two weeks to receive, review and draft opinions on the final proposal before it is sent to the General Assembly on November 15. The Taxation Realignment Commission itself formally dissolves January 1, 2011.

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Written by SCPC

October 29, 2010 at 8:55 am

2 Responses

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  1. A previous version of this blog inaccurately summarized Doug Lindholm’s views regarding mandatory unitary combined reporting. The error has been corrected in the current blog.

    Jameson Taylor

    November 4, 2010 at 3:12 pm

  2. […] reform efforts in both Georgia and South Carolina (i.e., the Taxation Realignment Commission: see here and here). The next State Tax Working Group meeting will be held December 8th, along with their […]


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