Any comprehensive review of South Carolina's tax structure should include reducing exemptions, resulting in a broader tax base and thus lowering overall tax rates, says the executive director of the Olde English Consortium.
The change could bring in as much as $5 billion in annual revenue for the state, says Mark Fanning.
The Chester-based consortium stresses collaboration to get greater efficiencies in education and economic development. Fanning is using some of those lessons to examine the tax code, pushing the idea the state is not broke, but the revenue system is.
Fanning spoke to about 50 people Thursday at the Museum of York County at the invitation of the York County Regional Chamber of Commerce.
His presentation was filled with numerous examples of items that are taxed, or not taxed, or are unevenly taxed. For instance, the state collects taxes on 30 percent of the gross proceeds of the rental of portable toilets. No taxes are collected on the other 70 percent of the toilet rentals, he said.
He also noted that "hard-working guys named Bubba" are being taxed every time they go the dry cleaner, but cruise ships that dock in Charleston pay no sales tax to have their linens cleaned.
"We are taxing working South Carolinians at rates higher than other Americans," he said. Small businesses are struggling because of the rates, he said.
Fanning suggested the number of exemptions means that about half the state's population is paying 100 percent of the state's tax burden.
The state Legislature has appointed the South Carolina Tax Realignment Commission to consider the issue and make recommendations. Fanning said he is focusing on the exemptions to help legislators find the political courage to make difficult decisions.
State Reps. Ralph Norman, R-Rock Hill, and Gary Simrill, R-Rock Hill, who attended Thursday's meeting, said Fanning's concept has merit, but you can't look simply, or solely, at the exemptions. For instance, the tax on a car purchase is capped at $300, regardless of the cost of the car. But, owners of cars pay local property taxes which are based on a car's value. The tax on a two-door economy car is different from a four-door luxury sedan.
Norman said he favored Fanning's suggestion that groups benefiting from an exemption should come before the Legislature periodically to request an extension. Norman also said cutting outdated programs also has to be part of the budget conversations.
Simrill said discussions of exemptions should be based on whether the exemptions create jobs.