Much Ado About Nothing: SC Sales Tax “Reform”

After much publicity about eliminating two-thirds of sales tax exemptions, the SC House Ways & Means Committee concluded on Wednesday that the state’s sales tax system wasn’t so broke after all. After reviewing the $2.8 billion in sales tax exemptions, the committee concluded that only $15 million—half a percent should go. After adjusting the current tax rate for repealed exemptions proposed by Ways & Means, the statewide sales tax rate would drop from 6.0 cents to about 5.97 cents.

Left standing were the sales tax caps on cars, yachts and airplanes, the August sales tax holiday that cuts taxes on wedding dresses and law firm office supplies as well as back-to-school clothes and supplies and the court-invalidated Thanksgiving weekend sales tax holiday for guns.

Despite all the kerfuffle around sales tax exemptions, the reality is that the vast majority of these exemptions make sense. What you quickly discover as you look closely at the exemptions (http://www.bcb.sc.gov/BCB/bea/exemptions.pdf) is that the real money is not in “special interest exemptions” or poorly drafted sales tax holidays. Instead, the big dollar sales tax exemptions are those which hit most heavily on everyday consumers and especially low-income consumers.

Long before we get to the truly obnoxious cap on sales taxes on cars, planes and boats and the multitude of other chump-change exemptions, the real money is in prescription drugs purchased at pharmacies ($585 million), groceries ($354 million) and electricity or other fuel used for home heating ($188 million). That is not to mention the $253 million from sales to the Federal government that is not taxable under the US Constitution or the $500 million in highway fuel which is simply taxed another way. Altogether, that’s $1.9 billion of the $2.8 billion that is “sitting out there” in sales tax exemptions.

If you look at a number of the exemptions initially targeted for repeal, several would have taxed business inputs. The general rules economists apply is that you don’t tax inputs if you are going to tax outputs because it produces pyramiding taxes on taxes. Thus the $25 million exemption for wrapping paper, wrapping twine, paper bags and containers that grabbed significant business attention makes sense, since the outputs will generally be taxed. The exemption on newsprint makes sense, although failing to tax the newspaper does not.

Some of the changes from the already limited initial proposal were pure lobbying pressure. The leading example of that was the $74 million for toll charges, telegraph messages, telephone carrier access charges and ATM transaction that the subcommittee removed from the repeal list. Those should be taxed.

Did the House GOP Caucus Committee that produced the initial proposal believe for a minute that eliminating the $22 million in fees paid to merchants for timely filing sales tax returns would—or should—survive?

The real problem with the bill as reported to the House Floor for debate this coming week is what it fails to do, not what it does. It leaves the $300 cap on cars, yachts and airplanes that everyone but car dealers agree should be lifted. And it fails to address the fundamental structural problem of our sales tax system. We principally tax goods rather than services even though every year we spend a larger portion of our income on services rather than goods. In its report, the Taxation Realignment Commission (TRAC) proposed taxing a number of additional services and intangible goods, like digital goods, software and data processing.

The “comprehensive tax reform” promised by the House GOP Caucus appears to have been more about election filing dates than about real reform.  The repeal of the corporate income tax has not even been heard in subcommittee.  The changes to property tax assessment ratios which promised to shift a billion dollars in property tax liability onto home and car owners or force major cuts in local services is stalled in Ways & Means.

As it rushes to the May 1 crossover deadline to get House bills to the Senate, the House will only consider an up-to-$84-dollar-a-year income tax cut to the upper half of South Carolina incomes, a 2 % cut in the income tax rate for largely small business pass-through entities and this whopping $15 million in sales tax exemption repeals.  With the Senate and its Finance Committee about to engage the Budget for most of May, chances of these bills getting much traction there are fairly slim.

 

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Rewarding Work and Building Wealth: A State Earned Income Tax Credit

Rather than doling out small individual income tax cuts of up to $84 per year to better off taxpayers, the South Carolina General Assembly should instead implement a Ronald Reagan endorsed pro-family, job creation measure which can have real impact—a state Earned Income Tax Credit (EITC). Twenty four states, including North Carolina and Virginia, have state EITCs.

The federal EITC is a refundable tax credit, meaning that, if the amount of the credit is more than you owe in income taxes, you get a refund check. You have to be working in order to get the credit. The credit varies by the number of children and marital status. Working families with children making less than about $36,000 to $49,000 are eligible for the federal credit. The effect of family size and income on credits can be seen at http://www.cbpp.org/images/cms//policybasics-eitc-f1-rev2-24-12.jpg.

A family with two children could, in 2012, get a maximum federal credit of $5,236. In 2009, the most recent year for which data is available, the federal EITC brought to South Carolina families $1.165 billion, an average of nearly $2,300 per return for over half a million low-income working families. Those taxpayers are spread across the state. In 2008, no SC House member had fewer than 1,403 taxpayers receiving the federal EITC or bringing less than $2.4 million into the district.

The EITC is generally considered the best anti-poverty measure we have in this country. It’s also good jobs policy. Still, South Carolina Rep. Tommy Stringer of Greenville, Chair of the S.C. House GOP Caucus’s Tax Study Committee, recently dismissed a state EITC: “It is bad tax policy to use the income tax system as a way to extend indirect welfare benefits but call it a ‘tax credit’.” But, it’s no more welfare than the home mortgage deduction or the untargeted business tax cuts proposed by Stringer’s study committee.

Wage and salary growth in the past decade has been especially slow at the bottom. Many low-wage jobs simply don’t pay enough to live on. A state EITC helps low-income families to cope with rising costs when no pay increases are available.  This is a credit that rewards low-wage families for working and has shown to increase job participation.  That jibes with our states newly announced pilot to force SNAP (food stamp) recipients to enter a jobs programs. The state and federal EITC also relieve pressure on low-wage employers, many in small businesses to raise wages.

A tax cut of $84 a year for middle and upper income families will simply disappear without real economic impact. Some will go into savings and some be spent in Vail. Research on federal EITC dollars show that they are either immediately put into the local economy or they are used for asset-building expenditures like education or paying off debt. A $524 refundable credit to a family with two kids could make a real difference.

At a time when the SC House purports to seek tax policies which drive economic development, they should look to a state EITC.  Typically states tie their EITC to the federal EITC because that simplifies administration.  Those costs usually run than 1 % according to a brief by the Center on Budget and Policy Priorities.

An EITC set at 10 % of the federal EITC would provide a credit of up to $524 in 2012 to a family with two children.  The price tag on a refundable EITC in South Carolina, according to an analysis by the Institute on Taxation and Economic Policy in D.C., would cost South Carolina about $118 million. That would be a far better investment than a small tax cut for better-off South Carolinians costing $77 million or a pointless general cut in tax rates for pass-through businesses costing $65 million when phased in.

In 1986, conservative icon Ronald Reagan described the federal Earned Income Tax Credit (EITC) as “… the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.” South Carolina legislators who repeatedly declare themselves adherents of the former President should join with Rep. Gilda Cobb-Hunter, who has pushed  state EITC for years, and follow his lead to create a refundable state EITC in South Carolina.

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SC Senate on Verge of Giving State Power to Take Over Medicare

The South Carolina Senate is poised to pass legislation to authorize South Carolina to take over all federal health care programs and repeal all federal health care laws and regulations. That would end Medicare, the health care program for persons over 65 or with disabilities, as we know it. The legislation got Second Reading last week on a 25-13 vote.

This bill signs South Carolina up for the Interstate Healthcare Compact, the brain child of conservative activists opposed to the Affordable Care Act. Congress must give permission for this compact to take effect. So, at this stage, state’s passing legislation to join these compacts is a feel-good exercise in the anti-Affordable Care Act drama.

Under that Compact, South Carolina could “… enact legislation to suspend the operation of all federal laws, rules, regulations, and orders regarding health care that are inconsistent with the laws, rules, regulations, and orders adopted by the member state pursuant to this compact.”

After giving up control of health care, the feds would continue, in compact states, to fund it at the level of health care spending in South Carolina in Federal Fiscal Year 2010. Those numbers are adjusted in the future based on population and an inflation factor. In 2009, Medicare provided $7.2 billion in payments for over three-quarters of a million South Carolinians and the federal contribution to Medicaid spending was $4.0 billion for over 800,000 among us.

As the proponents, the Health Care Compact Alliance, note: “Healthcare policy is about who and what is covered. The Health Care Compact is about who decides.” They are selling a pig in a poke.

However, we have seen in the recent US House Budget, what conservatives are thinking about both Medicaid, the joint federal-state program for lower income Americans, and Medicare, the federal program for seniors. For Medicaid, they would block grant it to the states, much as this compact would. States could then design their own solutions for good or ill. The House would transform Medicare by creating a health insurance exchange where new seniors would purchase private or federal health insurance with vouchers.

As Edwin Park of the Center on Budget and Policy Priorities in Washington, DC, observes of Medicaid block grant proposals: “In particular, [block grants] would shift costs and risks quite significantly to the states, to tens of millions of low-income Medicaid beneficiaries, and to the health care providers that serve those beneficiaries.”

Proponents argue block granting is an opportunity to use “states as laboratories” to develop better ways to address health. Matt Salo, Executive Director of the National Association of Medicaid Directors, is reported describing block grant talk as a “distraction. The real issue, as the president said to [governors at their Washington meeting] is, if there are Medicaid flexibilities we can do, let’s do them.” States routinely seek waivers to Medicaid rules to try what they believe are better ways.

Such experimentation could include turning health care over “to the free market”—totally ignoring the market failures inherent to health care, adverse selection and moral hazard. In South Carolina you add in market-distorting presence of an 800 pound gorilla, Blue Cross. Kenneth Arrow, Nobel Laureate economist, observed in 2005:

The problem then really comes down to the fact that the government is better than the private sector at keeping costs down- for insurance purposes. This isn’t true in any other industry. If, for example, you are trying to produce electronics, you could hardly do worse than have the government run such an industry. But, in an insurance program, it’s a different matter.

With no guarantees that the federal funding formulas will keep up with medical inflation or changing age structures in the population, states like South Carolina are more likely to turn to the time-tested tools for cutting costs. Those are: changing eligibility standards so that fewer people are enrolled; reducing services provided shifting costs onto beneficiaries and cutting payments to providers. Health care gets cheaper on the state’s books, but it doesn’t get better or smarter.

Even if the US Supreme Court were to invalidate the Affordable Care Act, the attacks on Medicaid (including the Children’s Health Insurance Program) and Medicare would continue. Medicaid especially comes with lots of federal strings which offends anti-federal state legislators. The programs represent a large chunk of federal spending—21 % of the 2011 federal budget which conservatives would like to reduce significantly or eliminate.

Although nothing in the Compact compels South Carolina to take over Medicare, nothing would stop it from doing so. The Compact only excludes health care provided by the Department of Defense and United States Department of Veteran Affairs to Native Americans.

The lead sponsor of S. 836 had not understood that this Compact includes Medicare—a highly popular program. In the face of questioning from Sen. Brad Hutto on the point, Sen. Mike Rose said he did not believe it did. Clearly it does. When Hutto attempted to amend the bill on 3rd Reading to exclude Medicare, the Senate stopped him from offering that amendment. Senator Rose, at that point, moved to put off the debate until he had researched the question—a motion which barely passed. The bill will be up next week.

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SC GOP House Tax Plan Shifts a Billion Dollars onto Owners of Homes and Vehicles

Two of the bills in the SC House GOP Caucus tax package will both transfer significant tax burden onto homeowners and car owners and gut budgets of schools, counties, municipalities and special purpose districts.  The legislation is advertised as reducing assessment ratios on manufacturers and on commercial property.  Both are phased in over four years and eight years, respectively.

The manufacturers’ bill artificially reduces the assessment ratio on manufacturing property and on business personal property (“the furniture, fixtures and equipment that are owned and used to operate a business”) to an effective rate of 6 % from the nominal rate of 10.5 %.  This bill will reduce revenues to local governments by $228 million when fully implemented.

The second measure applies not just to commercial properties, but to rental property and second homes as well.  The assessment ratio is dropped from 6 % to 5 %.  This will reduce revenues to local governments (schools, counties, municipalities and special purpose districts) by $827 million when fully implemented.

If you reduce the assessment ratio of  manufacturers, business personal property, commercial property, rental property and second homes, you drop the total assessed value of a community.  The remaining classes’ share of the total assessed value has increased even though its assessed value has remained the same.

To raise the same amount of funds for the jurisdiction’s budget, the millage—the total assessed value divided by the budget (expressed as $1 per $1,000 assessed value)—will have to go up.  If the millage goes up, but my assessed value stays the same, I pay more in property taxes.  The only way to keep my homeowners property tax and property tax on my automobile or truck the same is to keep the millage the same.  That means that my local government gets less money.

Because Act 388 of 2006 swapped property taxes for school operations for an extra penny in sales tax, the lost assessed value can’t be shifted to homeowners.  But that just puts more pressure on vehicle owners, utilities, agricultural property and transportation to fund schools since the amount paid by manufacturers, business personal property, commercial property, rental property and second homes will have gone down.

You might think you can just move this $1.06 billion dollars around, reducing taxes on three class of property owners while hiking it on others.  However, Act 388 also included a cap on millage increases.  The millage can’t increase each year by more than the increase in the consumer price index plus population growth, with some flexibility built in following years when the cap was not reached.  If the local jurisdiction reaches its cap, it’s only option, other than increasing fees, is to cut services.

In FY09-10, South Carolina schools, counties and municipalities had $13.7 billion in total revenues.  Of that, $4.6 billion came from property taxes.  Thus, nearly one in four property tax dollars has to be either reallocated to other property owners or the public goods those taxes fund—schools, public safety, sanitation and so forth—cut.

It’s easy for the General Assembly.  None of this $1.06 billion will come out of state coffers.  They are spending someone else’s money.  And they have hamstrung the ability of those someone-elses to move those burdens around or to raise funds in other ways.

It’s an ill wind that blows no good and this blows some good. When Act 388 passed, no one took it in the ear more than renters.  They had to pay increased sales taxes but go no relief on their rent like homeowners did on their total housing cost.  This legislation would lower property taxes on landlords.  However, there are no requirements that they pass those savings on.  The economics literature suggests that how landlords and tenants share changes in property taxes is largely a function of how tight the rental market it is.  Over the long run, it may slow increases in rents.

For those of us who own homes or vehicles, we are going to face increases in our millage rates and our taxes to pay for some of this billion dollars that people able to afford second homes, landlords and businesses will save.  What can’t be shifted onto us will be paid for by reducing the public goods that protect our quality of life and our children’s future.  This is very short-sighted public policy.

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SC Small Business Tax Cut Shrinks Government but Doesn’t Help Small Business Development

The SC House GOP proposed tax cut for small businesses will cost South Carolina’s General Fund $60 million per year while generating no economic development benefits.  This bill reduces the tax rate on businesses which are not “C” corporations (“sole proprietorships, partnerships, and ‘S’ corporations, including limited liability companies taxed as sole proprietorships, partnerships, or ‘S’ corporations”) from 5 % to 3 %.

The advocates for this change, our good friends with the SC Small Business Chamber of Commerce, do not argue anything but equity on behalf of this change.  “We want parity with big business,” they argued to the subcommittee, in the face of a proposed elimination of corporate income taxes.

These cuts are significant to the budget, but small to the business owner—only 2 % of profits.  For a business with $100,000 in profits, that would be a $2,000 savings—too little to fund new employees or productivity-improving investments.

According to the federal Small Business Administration:  “Most of South Carolina’s small businesses are very small as 77.8 percent of all businesses did not have employees and most employers have fewer than 20 employees.”  Small businesses are fragile businesses.  In 2009, we had 16,515 business openings in South Carolina—but 17,519 closings, including 389 business bankruptcies according to the SBA.  Those businesses on the verge of bellying up will have no profits.  Cutting taxes on profits won’t help them at all.

Businesses with fewer than 500 employees lost 65,943 net jobs in 2008-2009 in South Carolina, more wiping out the job growth in the previous three years.  Barely affecting this loss was the increase of 2,028 net jobs in businesses with 1 -4 employees.

The economic development narrative so often repeated at the State House that “small businesses drive jobs creation” is exaggerated.  Small businesses create a lot of jobs and, through failures, destroy nearly as many.  As a study by the St. Louis Federal Reserve found:  “…when one accounts for job destruction, small businesses appear to account for a significantly smaller share of net new jobs created in the private sector than many people might believe.” But small and medium-sized businesses are still an important part of net job growth.

There are real things that would actually work to help small businesses and grow our economy if that were your goal.  A cross-national study of small and medium-sized enterprises (SME) concludes:  “There is a general consensus that the competitiveness of an individual SME is strongly related to the “quality” of its owner/manager. “Quality” is, in this context, strongly related to the human capital of the individual, in turn influenced by a combination of formal education, training and experiential learning.”

Economic development authority Timothy J. Bartik of The Upjohn Institute for Employment Research recently observed:  “There is good research evidence for several policies that provide services to increase the productivity of small and medium sized businesses. Two policies with rigorous evidence of cost-effectiveness are customized job training and manufacturing extension programs,” which he elsewhere describes as providing “smaller manufacturers with information to improve their productivity through new technologies and better methods of workplace organization, business planning, and marketing.”

South Carolina politicians routinely utter pious mouthings about their commitment to small businesses.  We have some of the helpful programs, such as Small Business Development Centers, but expanding and adding to them and providing significant resources would be real steps to helping small businesses.

With this $60 million, we could better fund public education, health care and infrastructure—the things that businesses looking to relocate here are looking for.  Or we could redirect these funds to building the human capital in small businesses.  There is little evidence that those pushing the SC House GOP Caucus tax package are interested in doing anything but “to shrink government to the size where we can drown it in a bathtub.” Down that road lies ruin.

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SC House Republicans Move to Tax Working Poor

The SC House Republicans have moved to amend legislation to increase taxes on working poor South Carolinians.  The bill (H. 4997), part of the House GOP Caucus’s “comprehensive tax reform,” originally provided up to a $168 tax cut to taxpayers with taxable incomes in excess of $5,600 ($25,700 for a  single mother with two kids, no capital gains income and taking the standard deduction).  They accomplished the $163 million cut in General Fund revenues by collapsing the six tax brackets into 3—0 % ($0 to $2,800), 3 % ($2,800 to $14,000) and 7 % (income over $14,000).

In subcommittee, Rep. Garry Smith of Greenville moved an amendment which eliminated to 0 % tax bracket and applied the 3 % tax rate to all taxable income, not just that above 3 %.  That does two things.  It cuts the tax benefit for middle and upper income tax payers in half.  Since that reduces the hit to the General Fund from $163 million to about $77 million if no one paid more.

The other thing it does is increases taxes on all taxpayers making under $11,200 in taxable income.  Although the average increase is relatively small ($11 for those making less than $17,000 and $8 for those making between $17,000 and $27,000), the Fiscal Impact Statement shows $26 million in tax increases on those communities least able to afford such an  increase.   [The analysis of effects was done by the highly respected Washington, DC, based Institute on Taxation and Economic Policy (ITEP).]

The co-sponsor of the amendment to tax working poor South Carolinians claims that it is “flat and fair”.  That is only true if you ignore our regressive sales taxes which hit much more heavily on low-income people.  It’s only true if you ignore the discount South Carolina gives to capital gains income which is unavailable to most low-income South Carolinians.  It’s only true if you ignore the home mortgage deduction available to reduce taxes on those who can afford to buy homes.  We could go on.  In the real world, this proposal is not “flat and fair”.

An $84 tax cut makes no practical difference to middle and upper income South Carolinians.  It’s chump change that would barely buy you lunch at McDonalds once a month as long as you don’t bring a spouse or children. At most, it would represent a tax cut of one tenth of a percent for those in the middle 20 % of incomes.  Even at a net $51 million fiscal impact, that’s a serious hit to state funds with no significant  benefit for any family.

There is an alternative which provides meaningful assistance to working poor families—the Earned Income tax Credit. Described by Ronald Reagan as “The best anti-poverty, the best pro-family, the best job creation measure to come out of Congress,” the federal EITC provides a refundable tax credit to low-income working families.  That means that families get a check even if they owe no taxes. The credit has proven effective in moving low-income persons into work and incentivizes them to work additional hours.  The Committee for Economic Development, an organization of 250 corporate executives and university presidents, concluded in 2000 that “The EITC has become a powerful force in dramatically raising the employment of low-income women in recent years.”

Dana Milbank notes in the Washington Post that the latest proposal by Paul Ryan, the Chair of the US House Budget Committee “…slashes the safety net to pay for tax cuts mostly for wealthy Americans.”  Here, we raise taxes on the working poor to help pay for tax cuts for middle and upper income taxpayers while undermining state revenues that support education, health care and social services.  The growing war on the poor is morally deficient and bad public policy.

In 2009, the most recent year for which data is available, the federal EITC brought to South Carolina $1.165 billion, an average of nearly $2,300 per return for over half a million low-income working families.  A state EITC set at 10 % of the federal level would cost $118 million according to ITEP estimates and be simple to administer. It’s a much better alternative than collapsing tax brackets.

The Ways & Means Committee will likely take up this bill at its next meeting, which has not been scheduled.  When Governor Haley proposed a similar collapse of brackets to 0 %, 3.75 % and 7 % in her Executive Budget, she proposed holding harmless those whose taxes would otherwise be increased.  This plan, if it is to move forward, should be further amended to hold harmless those who would have their taxes increased.  Those who have signed “no new tax” pledges would otherwise out themselves as really meaning “no new taxes except on the working poor”.

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SC House GOP Sales Tax Plan Addresses only 8 % of Exempted Sales

Leaving the cap on sales taxes on cars untouched, the much ballyhooed elimination of “two-thirds of the special interest sales tax exemptions” in the SC House Republican Caucus’s comprehensive tax reform plan only effects 8 % of sales and use tax exemptions— $218 million of the $2.8 billion.  [All figures are from the BEA’s Sales and Use Tax Exemptions FY2008-09].  That’s not going to reduce overall rates very much.

This is not surprising.  The real money in sales tax exemptions is in prescription drugs purchased at pharmacies ($585 million), groceries ($354 million) and electricity or other fuel used for home heating ($188 million). That is not to mention the $253 million from sales to the Federal government that is not taxable under the US Constitution or the $500 million in highway fuel that is simply taxed another way. Altogether, that’s $1.88 billion of the $2.8 billion “sitting out there” in sales tax exemptions.

The House GOP left the most egregious exemption, a $300 cap on sales tax on cars, yachts, motorcycles  and airplanes despite earlier news reports that the cap would be phased out.  The elimination of a cap that taxes a $6,000 used car the same as a  $2.4 million Bugatti Vayron would have added $173 million to the exemptions eliminated, 80 % more.

So, who are the “special interests” whose exemptions are eliminated?  Telephone and ATM users lead the list at $74 million.  Next come Lottery ticket purchasers.  Of the $218 million eliminated, 22 % ($48 million) comes from taxing Lottery tickets.  The next special interest is students and libraries.  Books, textbooks, access to online services and other printed material used in schools (K-12 and higher ed) or for use in a school or publicly supported library would be taxed.  That’s $22 million.  Bible readers are apparently a special interest, too, since taxes would be added to purchases of “the Holy Bible,” newspapers, books, magazines and periodicals.  Twelve million dollars from the special interest group of readers.

An actual special interest, “radio and television stations, and cable television systems” would be liable for purchases used in producing, broadcasting, or distributing programs, an exemption which now saves them $9 million.

The next “special interest” is old people, really old people.  Elimination of the penny exemption for seniors 85 and older would add $5 million to eliminated exemptions.  Age-based tax preferences are bad public policy, but fixing this one won’t help much to lower the overall sales tax rate.

Two exemptions which have received press attention for their proposed elimination are the gun sales tax holiday over the Thanksgiving weekend and the back to school sales tax holiday in August.  Eliminating the gun holiday in the Code is only clean up.  The Supreme Court invalidated the law which enacted it.  It has continued, until this fiscal year, as a budget proviso.  The August sales tax holiday costs the state $3 million in tax revenues.  As the Tax Foundation notes, sales tax holidays are “Politically Expedient but Poor Tax Policy”.  It’s still not much money.

Every sales tax exemption has a lobbyist attached to it.  The $73 million proposed to come out of customers of phone companies and banks won’t go unchallenged.  Dry cleaners ($3.2 million), movie theatres ($2.8 million), hearing aid dealers ($2.1 million), amusement parks ($3.9 million), motor vehicle extended service or warranty peddlers ($1.2 million) and firms doing research and development ($2.6 million) won’t simply sit back and accept new taxes.  The retailers who will lose the $22 million reimbursement for collecting taxes in the form of a discount for taxes timely paid will be raising sand.  This proposal will not emerge unchanged.

In its report, the Taxation Realignment Commission (TRAC) proposed taxing a number of additional services and intangible goods, like digital goods, software and data processing, using the proceeds to reduce the overall tax rate. They recognized that we have moved from consuming goods to consuming services.  There are no such proposals here.

The  House Republicans had a real opportunity to fix serious issues in our sales and use tax code.  They passed on eliminating a car tax cap that only car dealers think makes sense.  They passed on taxing additional services and intangible goods.  Instead, they repeal numerous chump change exemptions making up only 8 % of the total currently exempted taxes.  That should lower sales taxes by half a penny—not the nearly three cents implied by the Caucus brag that it is eliminating two-thirds of those exemptions.

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