October 12, 2005 -- The property tax debate in South Carolina is hot, hot, hot, and getting hotter with each new day.  Taxpayers are demanding relief.  Legislators are determined to find a solution.  Not a day goes by without at least one of South Carolina’s daily newspapers reporting on the property tax issue.  Thousands of letters to the editor written by taxpayers desperate to have their voices heard compete for publication on editorial pages across South Carolina. 

 

Ideas regarding the solution abound.  Popular among homeowners, particularly homeowners along the coast, is the proposal to eliminate property tax on residential real estate by replacing it with an increase in the state sales tax.  While this approach might sound good to the homeowner, it would amount to a tax increase for the renters. 

 

Eliminating all existing tax exemptions would certainly help, but cannot be expected because tax exemptions are special favors that legislators grant, either because the cause requesting the exemption is warm and fuzzy, or is claiming that it will create jobs.  Other times, the exemption is granted to the special interests of campaign supporters and donors. Despicable? Yes; the probability of total elimination; none whatsoever.

 

Taxpayers need to be suspicious of any solution that our legislators propose that does not spell out the elimination of certain state government activities to pay for any tax relief.  Without such cuts in the size and activities of our state government, South Carolina taxpayers will not experience any tax relief, only a tax swap.  Tax swaps historically come back to haunt taxpayers.

 

Absent from the property tax debate has been any meaningful conversation regarding the amount of federal income tax being sucked out of South Carolina by the Internal Revenue Service.  Last year, the IRS collected $14 billion from South Carolina.  Our state budget last year was approximately $13 billion.  Based on these figures, if South Carolina did not pay federal income tax, and instead sent that same amount of money to Columbia, the state could in fact eliminate all property tax and sales tax and still have the revenue to maintain the state government.

 

Not paying federal income tax might seem like a pipe dream to the average person not familiar with history.  From 1776 until 1913, there was no such creature as a federal income tax.  Our nation prospered for one hundred thirty-seven years without any of its residents paying a federal income tax.  For the last ninety-two years, Americans have been paying property tax and just look at the size of the federal government now!  In 2005, the majority of federal government activities don’t remotely come close to fitting into the confines of Article I Section 8 of the Constitution of the United States, which clearly defines what functions our federal government was designed to fulfill. 

 

Finally, whether the 16^th Amendment, the income tax amendment, was actually ratified is highly suspect.  Currently, there is legal action initiated by the federal government against a former security and fraud investigator for the Criminal Investigation Division of the Illinois Department of Revenue, William J. Benson. Benson claims to have proof that the 16^th Amendment is the law that never was because it was never actually ratified.   The federal government has asked a federal court to rule that Benson be prohibited from making his claim that the 16^th Amendment actually failed ratification, yet the government is unwilling to prove in federal court that Benson’s claim are false.  

 

South Carolina legislators should seize the moment and pass a resolution prohibiting the paying of federal income tax from within the state until such time when the federal government provides proof that the 16^th Amendment of the Constitution of the United States of America was lawfully ratified.  Such a resolution would be a real positive step towards property tax relief in South Carolina; a step that would also have the collateral benefit of forcing the federal government to down-size and therefore, return sovereignty to the states.