TRAC making headway with tax reform recommendations

A group appointed to help fix the way the state taxes it citizens is getting closer to the end of its work. The South Carolina Tax Realignment Commission was appointed by state government to study and make suggestions to improve a tax code that has been described as antiquated.

Charles Way, a former South Carolina Secretary of Commerce and now a major resort developer, says he has been pleased with what TRAC has done so far. “I think we have tried to be very, very open and transparent and I think that we have been,” says Way.

At the meeting, Way told commissioners that he thought they would have heard from more of the industries to be affected by tax changes. He mentioned car dealers in particular as not having weighed in during this study committee process.

TRAC Commissioner Don Weaver, a realtor, says they did not hear from the service sector, who under their proposal, would be subject to taxes for the first time. Review list of services to be taxed

Weaver says, “I was a little disappointed that they (the subcommittee) had not heard testimony and that we, the whole committee had not heard from the service industries.”  He says if service providers mobilize a lobbying effort, it will most likely focus on legislators when the issue comes up in early 2011.

Weaver was the lone “no” vote on the sales tax plan, because of its taxes on residential utilities. “We are already taxing two necessities, groceries and gasoline and to add two more, water and electricity. That was my main concern,” he says.

The commission Thursday moved forward on approving a sales tax plan lowering the overall rate to five percent and eliminating sales tax exemptions on dozens of industries. The plan also puts back into place a grocery tax at 2.95 percent.

The commission passed two recommended options for a fuel tax: a general five cent increase or one that adjusts with the cost of fuel.  Both options will be capped, says Commissioner Kenneth Cosgrove, so that South Carolina’s rate would always be lower than North Carolina’s.  “So that no matter what the price of fuel does, we will not allow the tax to go over 29.9 cents and the key there is that it keep us underneath the floor of North Carolina’s tax,” Cosgrove explains.

The committee members also suggested, but did not formally recommend, that lawmakers look at ways to tax alternative fuel. Federal and state lawmakers, as well as business interests,  have been more outspoken in the past few weeks about the need for road repairs throughout South Carolina. The fuel tax would apply to those fixes.

TRAC next takes up individual income taxes and property taxes.

The state legislature will have consider the recommendations and decide how to act on them–when the new session begins in January. Even members of the commission say that major reform is not likely.

“They may do 20 percent of what we recommend,” says Weaver, “but that’s a start.”