House GOP wants to cut exemptions

House GOP wants to cut exemptions

S.C. House Republicans pledged Wednesday to introduce a bill that would eliminate two-thirds of the exemptions to the state’s sales tax and, in exchange, lower the overall sales tax rate and business income taxes.

The bill is one of 10 bills that Republicans, who control the House and Senate, plan to introduce dealing with tax reform this legislative session.

At $2.2 billion a year, sales taxes account for 42 percent of the state’s revenues. But the state has 78 sales tax exemptions – so much, that the state actually exempts more revenue from the sales tax than it collects.

In November, a Columbia attorney asked the State Supreme Court to throw out those sales tax exemptions, arguing they are unconstitutional because they amount to “special legislation” that only affects certain people. The exemptions also take money from important state functions, like public education, the lawsuit argues.

Republicans have spoken out against the lawsuit. House Speaker Bobby Harrell and Senate President Pro Tempore Glenn McConnell, both Charleston Republicans, say eliminating all of the sales tax exemptions would amount to a $3 billion tax increase.

Harrell said Wednesday he wants to keep sales tax exemptions on groceries, electricity and prescription drugs. He said he wants to use the extra money raised by eliminating other exemptions to lower the overall sales tax rate, now 6 percent, along with income taxes on businesses.

“The final bill will actually be revenue negative, so it will not generate more money for government,” Harrell said. “It will actually end up decreasing the amount of money that’s coming into government, but making the system fairer by eliminating sales tax exemptions that are antiquated.”

Harrell said Republicans will have a bill ready to introduce in the next few weeks.