ow is tax law made in the State of South Carolina? Many in the general public seem to have the notion that legislators simply lock themselves up in marathon meetings, tear apart every word in a bill, vigorously debate the relative merits, arrive at a consensus understanding and eventually pass a bill.

But, that’s not the way it’s done.

A more typical way is as follows.  A specific business, for example, working with their accountant, tries to interpret a section or provision in the Code of Laws of South Carolina that seems to apply to their unique situation.  However, the application of the law is not crystal clear.  So, the business calls the South Carolina Department of Revenue (SCDOR).  The SCDOR governmental attorneys or legal counsel look over the question and agree that the law is not exactly clear.  So, at this stage, the SCDOR suggests some clarifying language to existing law to address the ambiguity. 

From this point, continuing our example, the clarifying language is passed on to a local state senator who files a bill.  After the bill is referred to committee, a group consisting of usually three senators discusses it in a specialized (tax) subcommittee.  They receive a short explanation from staff and approve the bill (with or without suggested amendments).  Then the bill is discussed by the full committee and approved—not atypically—in a matter of several minutes. 

Further, this bill is on a committee agenda with eight other bills.  Since it is not considered controversial, it is passed on the Senate floor without any debate.  Then the bill is sent to the House of Representatives where the process of committee to subcommittee to full committee to full legislative body is repeated.  If everything goes as planned, the bill then becomes a law.

Now, there is nothing wrong with the way the tax law is being made in this description.  In fact, the process is actually very efficient.  That’s because legislators are rationing a very precious commodity, i.e., time.  And, to save time, things must be simplified.  Labor is divided and specialized so that more can be accomplished.  Most importantly, decisions are made incrementally by considering marginal changes to the body of the law. In the example outlined above, a section or provision of the tax code is marginally changed.           

Unlike this example of the legislative process, however, another and more rational perspective presents itself, namely one which views the Code of Laws as “a set of systems.”  There is—for all intents and purposes—a system for public and higher education, public safety, health, and the other services offered by state government.  There is, or rather should be, also an orderly system for taxation.  As that system is changed at the margin by the various bills that become law, as exemplified above, sometimes the tax system can lose its coherence, orderliness, and unity.  Indeed, a certain type of behavior that is encouraged by one tax law may be discouraged by another.  Internal inconsistencies multiply and the system becomes an “amalgam” of separate tax laws. This presents problems, discrepancies, and contradictions. As such, a solution is needed.

The solution is to undo the amalgam and restore or bring into being, to the extent possible, a better system of tax laws where inconsistencies and contradictions are unraveled and corrected. In short, the tax structure should be contemplated and adapted as a more rational and orderly system.  And that’s why a Joint Committee on Taxation is needed and is, in fact, now a reality.

The original Tax Study Commission was established by Act 770 of 1958, and significant amendments to the enabling law were passed in 1959 and again in 1978.    The Commission was tasked with making a careful review of the state tax laws, emphasizing simplicity and fairness.  The Commission played an important role in transitioning South Carolina’s tax code into conformity with the Internal Revenue Code, particularly during the 1970s and 1980s.  During the 1990s, with the passage of the 1993 Government Restructuring Act, many joint committees were eliminated because of the view that they were superfluous, especially in the sense that they were duplicative to the work of standing committees in the state Senate and House of Representatives.  The Tax Study Commission was dormant for much of the 1990s, and it was repealed in 1999.           

In 2001, Senator Hugh K. Leatherman, Sr. of Florence became Chairman of the Senate Finance Committee.  Senate rules direct bills related to the state’s tax code to be referred to the Senate Finance Committee.  As a businessman and engineer, Senator Leatherman saw a compelling need for an approach to the tax code that looked at the system of taxation.  He had also served on the Tax Study Commission in the 1980s when it was most active and influential.  So, in 2002, Senator Leatherman filed a bill to establish the Joint Committee on Taxation.  The powers and duties of the Joint Committee were the same as the original Tax Study Commission.  The language was added to Senate Bill 852 and became law in June of 2002 (Act # 334 of 2002).

The Joint Committee on Taxation is composed of nine members who are appointed as follows: three senators appointed by the Chairman of the Senate Finance Committee; three members of the House of Representatives appointed by the Chairman of the Ways and Means Committee; and three representatives of the business community, one being a certified public accountant, appointed by the governor.

The committee is tasked with the following duties:

An interesting part of the Joint Committee’s enabling legislation is its’ “sunset” provision.  The Committee must make reports and recommendations to the General Assembly and the governor by June 30, 2006.  At that time the Joint Committee on Taxation will be dissolved unless reauthorized by an act of the General Assembly.

On October 29, 2002, the Joint Committee on Taxation met for the first time.  The membership includes Senator Hugh K. Leatherman, Sr., Chairman of the Senate Finance Committee and Representative Bobby Harrell, Chairman of the House Ways and Means Committee.  Other members include Senators Nikki Setzler and Wes Hayes as well as Representatives Herb Kirsh and Dan Cooper.  Gubernatorial appointees are Mr. Ed Sellers, Mr. Tim Wilkes, CPA, and Mr. Jim Stuckey, Esq.

At the organizational meeting, the Joint Committee extended an invitation to Mr. Hunter Howard, Executive Director of the South Carolina Chamber of Commerce to serve on the group in an ex officio capacity.  Of interest is the fact that Senator Leatherman, Representative Kirsh, and Mr. Howard have previous experience serving on the original Tax Study Commission.