Beware of a backdoor tax increase
A $3 billion tax increase would be forced on all South Carolinians if a lawsuit recently filed in the S.C. Supreme Court succeeds. The suit is being brought by Dick Harpootlian, the chairman of the S.C. Democratic Party, representing Matthew Bodman. The lawsuit would raise taxes by 6 percent across the board on many everyday items such as residential electricity and water bills, prescription drugs, groceries, newspapers and diabetic supplies, just to name a few. It would abolish all of our state's sales tax exemptions, resulting in the largest tax increase in our state's history.
Faced with a conservative General Assembly that has proven its resolve to cut government spending instead of raising taxes to balance our state's budget, this group decided to bypass the Legislature by taking its tax hike crusade to court, and the S.C. Supreme Court has agreed to hear their case.
You may not think this will greatly affect you, but this backdoor tax increase would be paid by every single South Carolinian and would swell the size of our government. Adding $3 billion in new taxes would grow our state's current $6 billion General Fund Budget by an astounding 50 percent.
Recent news accounts about this court case haven't fully described just how much the elimination of these sales tax exemptions will directly impact your wallet. But should this lawsuit succeed, people will quickly become very aware -- if only too late.
This lawsuit tries to portray these exemptions as "special interest" corporate handouts. But the vast majority are important tax cuts that save South Carolinians a lot of money. Paying an additional 6 percent to keep your water running, your lights on, your prescriptions filled, and to buy groceries for your family are taxes on the necessities of life, not corporate loopholes.
Among the top 10 sales tax exemptions are prescription drugs, $585 million; motor fuel, $500 million; groceries, $354 million; residential electricity, $188 million; cars/motorcycles/boats/planes, $173 million; toll charges (telephone), $74 million. The lawsuit would make all of these, and more, subject to sales taxes.
This lawsuit isn't about reform. It's a blatant political maneuver designed to circumvent the legislative process, and by doing so, usher in a new wave of Democratic-sponsored taxing and spending. This is the same reasoning currently being employed by Washington with terrible results for our country's economy.
Taking more money out of our recovering economy and putting it in the hands of government is not a path to prosperity and is an avenue South Carolina should avoid.
The most dangerous part of this blanketed $3 billion tax hike is that there is no consideration being given to any corresponding tax cuts.
Extensive reform of our state's tax code is long overdue, and it's time for the General Assembly to deal with this issue. Comprehensive restructuring of our revenue system would improve South Carolina's business climate and make our tax structure more equitable.
But this process must take place in the legislative arena, where the resulting effects on businesses and individuals are carefully considered, not mandated by court intervention.
Eliminating some exemptions no longer serving a valid purpose would give us an opportunity to lower other taxes. This approach to reform would allow for broader tax relief, make our state more competitive, and would prevent an overall -- and unnecessary -- tax increase.
That is why we felt it was necessary for the House and Senate to jointly file an amicus brief with the S.C. Supreme Court detailing this process. Our reason for weighing in was to protect the people of South Carolina from a $3 billion backdoor tax increase that includes no reforms and no corresponding tax relief.
Both the Legislature and the governor have clearly stated that major tax reform is a top priority this session and have already put forward several ideas with other initiatives being worked on during this past summer and fall.
To be effective, and to make our tax structure more competitive and fair, our efforts must translate into legislation, rather than a lawsuit brought before the S.C. Supreme Court designed to bring about the largest tax increase in the history of our state. Following through with legislative action is the only way real comprehensive reform will ever happen.
Bobby Harrell is speaker of the S.C. House of Representatives. Glenn McConnell is president pro tempore of the S.C. Senate. Both are Charleston Republicans.