Did you miss the big tax and energy news?

January 4, 2019

Oran P. Smith, Ph.D

Senior Fellow

During those mad, mad days at the end of December, known as the Christmas holiday news hole, a number of bombshells dropped. Here are two that you will want to know about.

  1. Progress on the sale of Santee Cooper. Avery Wilks of The State reports that on the day before the state Public Service Commission approved the SCANA-Dominion Energy merger there was a “secret meeting” in North Charleston hosted by ICF International. ICF is the Virginia firm hired by the Santee Cooper Recommendation Committee to vet offers for the purchase of state-owned electricity utility Santee Cooper. It appears that six suitors attended.

The pivot from SCANA to Santee Cooper had begun.

That already means Palmetto Promise Institute was correct that $9 billion poured down a hole in Fairfield County by Santee Cooper and SCANA, $4 billion in Santee Cooper nuclear debt and a total (principal and interest) of $15 billion wouldn’t drive away all legitimate bidders.

The room was filled with legal and accounting brainpower from Duke Energy (based in North Carolina and serving 750,000 in South Carolina with two affiliated companies), Dominion Energy (of Virginia who just bought SCANA and Carolina Gas Transmission in 2015), NextEra Energy (Florida, who owns Florida Power & Light), Pacolet Milliken Enterprises (Greenville, who owns Lockhart Power and NiAmerica), LS Power (New York, who just sold a gas-powered plant to SCE&G) and representatives of the 20 electric cooperatives in South Carolina (who buy a majority of Santee Cooper’s power but own no electricity generation assets themselves).

That’s an impressive group. They were there because they were invited (that means they had enough juice to make the cut with ICF) and because they had enough interest to come get their questions answered about Santee Cooper’s balance sheet and operations.

The timeline will be tight—bids are due January 14, ICF will score the bids and report to the legislative Santee Cooper Committee in late February, and the General Assembly, who must vote on the recommendation, will adjourn (barring a special session) in late May.

Time is of the essence for another reason: ratepayers are hurting. According to The State, direct-serve Santee Cooper customers are already paying about $5 a month to cover the nuclear project. Santee Cooper says their customer bills will increase another $13 a month over the next 38 years. According to our Palmetto Promise research, based on real numbers, that is a low-ball estimate.

  1. North Carolina’s tax law revolution.

On January 1 here’s what happened:

  • North Carolina’s personal income tax rate fell from 5.49% to 5.25%.
  • Its standard deduction, or “zero tax bracket,” for families filing jointly increased from $17,500 to $20,000, and from $8,750 to $10,000 for individuals.
  • Its corporate tax rate fell from 3% to 2.5%. That’s the lowest rate in the nation.
  • 5 million North Carolinians are now exempt from state income tax (that’s 30% of all income tax returns filed).
  • 354,326 adults will be removed from the income tax rolls (a 23% increase in individuals exempt from the state income tax).
  • North Carolinians will save about $380 million in the 2018-19 fiscal year, $780 million in 2019-2020, and $810 million in 2020-2021.

But, those economy-boosting reforms are NOT new to North Carolina.

Earlier tax reform efforts in The Tarheel State caused the economy there to add a whopping 100,000 jobs in 2018, with rural areas growing as well as suburban and urban.

Economic growth, increased state revenue, and continued rate reductions that benefit real working families is happening in North Carolina. That’s encouraging news for the hard work ahead here in South Carolina to stand up for the small businesses and economically challenged South Carolinians who are getting hammered by our current code here.

The Christmas break takeaway? The move to let free enterprise run Santee Cooper is gaining traction, and tax reform in North Carolina is paying dividends.

If we seize the day, we can make 2019 the “Year of the Ratepayerand “The Year of the SC Taxpayer!”