What was Haley thinking?

The Democrats took their first swing at GOP gubernatorial nominee Nikki Haley, calling her a "tax and spend" politician in an ad which aired on TV in the Midlands and with a website: http://www.thanksnikki.com/.

Haley's recent proposal to reinstate sales taxes on groceries as a trade-off for repealing the corporate income tax is the kind of stuff that Democratic strategists dream of. No matter how the macroeconomic analysis works out, taxing food during a recession in a state with double-digit unemployment in order to fund tax breaks for corporate business enterprises looks bad.

Not even the South Carolina Democratic Party, with all their recent fumbles, could miss this opportunity to go on the attack.  In a more competitive state, this kind of attack could do some serious damage to her candidacy, but Republicans have tremendous advantages with resources and a healthy lead among general voter preferences that can offset dumber moves - for now.

Haley claimed that ending sales taxes on groceries “didn’t create one job”, but for the twenty percent or more of South Carolinians who are either unemployed or underemployed - working fewer hours and/or for lower wages - a few dollars less on groceries here and there adds up.

Not everyone makes the kind of money she apparently earns. In fact, most South Carolinians don't - and we can't imagine many of them would appreciate paying more for basic necessities in order to give large businesses - who are doing many of the mass layoffs that have hammered the state's workforce - tax breaks.

Is it possible that ending the corporate income tax would help South Carolina attract jobs? Sure, but then again, so would reducing income taxes on small businesses - an idea she once touted but has since abandoned.  But there are all sorts of loopholes and exemptions which would have far less impact upon those hardest hit by the ongoing recession that Haley could have considered. One we'd like to see closed is the cap on the sales tax on cars.

Taxing basic necessities, such as groceries, is the kind of issue where symbolism matters at least as much as substance. As such, we aren't sure what Haley was thinking when she put this proposal together.

Haley's proposal allowed Democrats to bring out the old class warfare tactic and gave a little credence to the stereotype that Republicans want to take from the working man and give to the rich. It's certainly not the kind of image Republicans want to have, nor the kind of message that will help her get elected in November.

1 Response to "What was Haley thinking?"

  1. Jimmy 18/8/10 09:07
    While I have disagreed with you on Nikki Haley in the past (meaning I actually supported her in the primary), I agree with you on this one. Nikki says that the grocery tax elimination did not create a single job. She may be right. But there are TWO reasons that tax cuts are a central tenet of the school of conservative economic policy: to stimulate economic growth/create jobs AND to allow wage-earners to keep more of their income. And the two go hand in hand. Cutting taxes to allow people to keep more of what they earn in turn has stimulative effects on the economy, which then aids in job creation, etc. It was the central argument of the George W. Bush tax-cutting agenda ("it's not the government's money, it's the people's money!")

    Now, as a pro growth economic conservative, if I looked at a list of all taxes and had to pick the first one that I would cut, it would not be the grocery tax. I get that. The grocery tax cut has been a favorite tax cut traditionally targeted by Democratic politicians (just look recently at Mississippi) who tend to shy away from corporate/business tax cuts or across-the-board income tax cuts. But also as a conservative, I would take my "no new taxes/no increase in taxes" pledge seriously and not seek to bring back a tax we have already done away with.

    Finally, it's a myth that you have to raise one tax to make up for a rate reduction of another tax, a myth that Haley seems to be buying into. Haley knows that she is going to push significant spending reductions (that hopefully the General Assembly will go along with) and she also knows that her proposed cut or elimination of the corporate tax will have stimulative economic effects to the state's coffers. You do not need to bring back a grocery tax at the same time. It's not what conservatives need to be talking about.

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