Sales tax exception under fire

House bill would check exemptions

The Associated Press

COLUMBIA - A bill introduced Thursday in the House calls for a review of all sales tax exemptions, creating a commission to study whether items including newspapers and manufactured homes should continue to be sold without sales tax.

The 15-member commission would study all exemptions and determine which to keep, revise and eliminate. The group would report back in January 2007 to the House.

"The bottom line is, we need to look at sales tax exemptions. They're antiquated, and a lot of them have outlived their usefulness," said Bobby Harrell, R-Charleston, who proposed the bill.

Thirty-two House members have signed on to the bill since Harrell announced its drafting Tuesday.

Many exemptions have been around for decades without review. A list of exempted items shows an estimated $1.3 billion could be added to state coffers if taxed, according to the state Office of Research and Statistics.

A House committee studying property tax reform began to go through the list in October but didn't get anywhere after lobbyists for each item took the podium to say why their exemptions should remain.

Senate President Pro Tem Glenn McConnell, R-Charleston, compares attempting to ax exemptions to prodding a hornet's nest with a stick.

"Lobbyists come flying out with all their accounts and go after votes," he said.

To deflect some of that, Harrell proposed requiring an up or down vote on the committee's entire package, which lawmakers could not amend.

The bill proposes that the recommendations would automatically take effect if the General Assembly does not vote by July 1, 2007, but that raises constitutional questions, McConnell said.

McConnell, chairman of the Senate Judiciary Committee, said the idea appears to be an "unlawful delegation of authority to a commission" because it's "giving them power to make law if the General Assembly failed to act."

McConnell said the automatic clause would be a hard sell in the Senate, which, unlike the House, allows members to filibuster. A senator could get his way by talking and preventing a vote, he said.

Harrell said he would look at changing that part of the plan. He said he is just trying to find a way to prevent lobbyists from defeating recommended exemptions.

Harrell's proposal comes one day after Gov. Mark Sanford's State of the State address, where he asked the General Assembly to review sales tax exemptions as part of its property tax reform efforts.

Homeowners across the state, spurred by last year's reassessments, are demanding that legislators cut property taxes this election year. Proposals discussed in both the House and Senate would swap property taxes for a 2-cent-on-the-dollar increase in the state sales tax.

"Changes in the sales tax should ideally be more comprehensive than just a one or two penny increase," Sanford said. "We should take the opportunity to look at exemptions that are not serving their purpose."

McConnell said that won't happen this year. Trying to cut exemptions as part of the property tax package would invite too much opposition, he said.

Under Harrell's bill, the state would use new revenue from eliminated exemptions to reduce the state sales tax.

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