Group recommends higher gas tax, new taxes on services, water and electricity

COLUMBIA — You would pay more to drive your car, drink water from your tap, turn on your lights and take medicine to treat your illness under a set of new taxes proposed to lawmakers.

Also for the first time, services such as home pest control treatment and tanning at a salon would be taxed. The state currently taxes a limited number of services -- only 20 percent of the 168 available services in the state are taxed. The national average is that 57 percent of services are taxed.

The state Tax Realignment Commission today voted on a package of tax reforms to be considered by the Legislature when it reconvenes in January. Any change requires lawmakers’ approval. The new taxes would allow the state to drop the 6-cent sales tax rate to 5 cents.

The commission recommended the sales tax on gasoline increase by 5.5 cents to 21.5 cents for a year, dropping back to 21 cents after that. South Carolina’s gas tax is the lowest in the Southeast and the third lowest in the country.

The commission also recommended that prescription drugs purchased at retail stores such as CVS be taxed at 1.25 percent. Medicaid and Medicare recipients would be exempt from paying the tax. The average person with private insurance buys $70 worth of prescription drugs a month. The proposal would add an extra 88 cents in taxes a month. The taxes would be capped at $100 a year.

The commission also called for people to pay a tax on electricity and water for the first time. The rate would be 1.25 percent.

The average household spends $1,900 a year on electricity and about $500 on water. Based on that average rate, people would pay 79 cents more a month for electricity and 19 cents more per month for water, under the proposal.

There are 12 states that tax water and 23 that tax electricity.

Services would be taxed at the proposed statewide sales tax rate of 5 percent. Doctors’ and lawyers’ fees would be excluded, but consumers would pay taxes for other services including air conditioning repair, manicures, gym memberships and tattoos, for example.

The goal of the tax changes is to create a broad tax base with lower overall rates, commission chairman Bernie Maybank said.

But not all the commissioners were on board. Commissioner Don Weaver, president of the South Carolina Association of Taxpayers, urged the group to rethink the proposal to tax basic necessities. His motion failed.

“We’re not talking about luxuries here,” Weaver said.

Any changes to tax policies will generate much debate among lawmakers and the commission’s proposals are expected to be a tough sell in the Republican-controlled Legislature.

Check back with postandcourier.com for updates. Read more in Friday’s edition of The Post and Courier.