Lawmakers Address Concerns About Proposed Sales Tax Changes

An initial recommendation to change South Carolina's sales tax system is being met with hostility by a lot of taxpayers, since the plan would add a 2.5 percent sales tax to groceries, electricity, water bills and prescription drugs.

The Taxation Realignment Commission gave preliminary approval to the plan Wednesday, but TRAC must still give its final approval, send the recommendations to state lawmakers and then they must vote on them.

Besides the 2.5 percent sales tax on those essentials, the plan would start charging sales tax on hearing aids and prosthetic limbs, newspapers and other items that are now exempt. The plan would also phase out the current $300 sales tax cap on cars and trucks, but would not alter it for boats and airplanes.

To offset the new taxes, the state sales tax rate would drop from 6 percent to 4.96 percent.

Rep. Bakari Sellers, D-Denmark, says he understands taxpayers' genuine concern about the plan. But he says people need to remember the millions of dollars in budget cuts lawmakers had to make this year, along with a shortfall of more than $1 billion looming next year when federal stimulus money is gone.

"There comes a point when you can't cut any more. You're not cutting meat, you're cutting the bone and we have to seriously look at what the TRAC commission recommended," he says.

He thinks people who are understandably complaining about the possibility of paying sales taxes on groceries, medicine, water and electricity will feel differently if the state were to have to cut education even more, leaving their child's class with 60 students instead of 25.

"When we run out of school bus gas and now they have to drive their kids to school, when... we have to start reducing the rolls of those persons on Medicare, then these people will understand that what we're dealing with is real life," he says.

Rep. Nathan Ballentine, R-Irmo, says it's way too early for people to get too upset about what might happen with the TRAC recommendations. "What I tell them is have a little bit of patience," he says.

He says lawmakers created TRAC to take the politics out of decisions on tax policy, so lawmakers need to let TRAC members finish their work before getting involved.

As for the chances of the TRAC recommendations passing, he says, "I'll tell you that we've got to pass something. I mean, we've got a billion-dollar shortfall staring at us. Now the good news is, as a conservative, the proposal that we tasked them with is to make that revenue-neutral."

But while he thinks lawmakers will have to pass something, Rep. Sellers says, "It'll probably pass somewhere around Neveruary." He doesn't think Republicans in the House will be willing to pass tax increases, even if they're offset by a decrease in the sales tax rate.