Panel approves changes to lower sales-tax rate

COLUMBIA --- A bikini would be off limits for the August back-to-school sales-tax holiday, but sneakers would probably be OK under a plan approved Thursday.

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The three-day shopping holiday, which cost the state $2.8 million last year in lost sales-tax revenue, regained a little of its festiveness after members of the S.C. Taxation Realignment Committee voted to restore the sales-tax exemption for school clothing and shoes after a draft report strictly limited it to school supplies last month.

"I can't turn around with everything else we've done and say to parents we're now going to start charging you taxes again for school-aged children's clothes," said commissioner Don Weaver, who introduced the change.

"I just don't think that's right."

The commission approved a host of recommendations aimed at broadening the tax base and lowering the overall sales-tax rate from 6 percent to 5 percent. Advocates for repealing the exemptions stress that what appears to be an assortment of tax increases, in effect, amounts to an overall lowering of sales taxes for everyone.

The S.C. General Assembly must vote on the plan after returning to Columbia next year. Lawmakers also decide on the date any changes go into effect.

Sales tax makes up 42 percent the state's general-fund revenue and represents its largest source of money. Still, South Carolina exempts $2.19 billion in general sales tax, a sliver more than the $2.17 billion it collects. The TRAC recommendations are projected to expand the state's tax base by about $10 billion.

Other proposals approved include a nickel increase to the state's gas tax, raising it from about 16 cents to about 21 cents. Groceries would come with an estimated 2.5 percent sales tax. Water and electricity would see a 1.25 percent tax, with an average yearly electricity bill of $1,900 equating to 79 cents more per month and the average water bill rising 19 cents per month.

The electricity and water tax drew outcry from Weaver, who is the president of the S. C. Association of Taxpayers, but the panel overruled him.

Commissioners also approved a 1.25 percent tax on prescription drugs. That means for the person spending an average $70 a month on retail prescription drugs, the change would bring a monthly increase of 88 cents.

The panel's proposal also set a $100 cap on the sales tax for non-Medicaid or non-Medicare patients. Anything above that would be converted into a refundable credit, provided the individual kept track of receipts and filed for it during tax season.