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Businesses,
legislators split on effects
of proposed sales tax
increase in S.C.
March
25, 2006
By MEGAN
VARNER
Index-Journal
senior staff writer
With
the typical family constantly reaching into the piggy bank to
fund car payments, mortgages, monthly bills and other expenses
for mom, dad and the kids, any tax relief handed down from the
state Legislature might seem like a blessing.
State
lawmakers are considering reducing property taxes on
owner-occupied homes by using an increased sales tax to
compensate for the eliminated funds coming into the state
treasury.
But the proposal is leaving some people
scratching their heads at what appears to them as simply
exchanging one tax for another.
In an article published
this month in The Index-Journal, Partnership Alliance CEO Jeff
Fowler said he is concerned that lawmakers are rushing to pass
property tax reform — with increased sales taxes — without
fully considering the impact it might have on businesses,
consumers and the economy.
By eliminating some costs on
property taxes, such as operational millage for schools,
homeowners would pay less each year.
But an increase of
2-3 percent in the state sales tax might make it difficult for
some families — especially lower-income families — to afford
the higher cost on items such as clothing, the article
said.
Because shoppers could be more frugal with their
dollars, some businesses might feel the pressure of less
consumer spending and higher costs, and stores could be forced
to reduce their merchandise or cut jobs.
The issue is one
that Greenwood business owners are watching closely. Many are
split on the effect the legislation, if passed, would have on
local consumers and the economy.
Though a small increase
wouldn’t seem to make a large dent in consumers’ wallets, over
time, however, the costs could add up. Large-ticket items,
such as furniture or jewelry, could have a noticeably larger
final price tag.
Alvin Rankin, owner of McCaslan’s Book
Store and Office Supply in Greenwood, said he is “totally
against” the sales tax increase, adding that shoppers will
feel the increase when they make it to the register.
“I
think everybody will feel it no matter what they are buying,”
he said, adding that the local economy could suffer. He said
the store bases its inventory on sales, and if shoppers scale
back their purchases, the store might have to scale back its
supplies.
But J. Carl May, of May Jewelers in Greenwood,
said a small increase in sales tax wouldn’t “make a bit of
difference” for some consumers.
“When people want something
badly, they will pay (the tax increase) anyway,” he said,
adding that, as a property owner himself, he is “all for” the
reduction in property taxes, even if it means an increase in
sales tax. “I don’t think (the consumers) will ever know the
difference.”
Thayer’s manager Taylor Wilson agreed that
some consumers would pay the extra sales tax because the
decrease in property tax would be “such a big savings to
them.”
But on big-ticket items, she said, the jury is still
out on what consumers would do.
“You kind of wonder what
the effect would be,” she said, adding that consumers would
have to weigh the savings on property tax with the added costs
of sales tax. Some might opt to drive to another state to make
purchases or buy online, but Wilson said higher gas prices
increasing shipping and driving costs would counteract the
savings.
And if consumers decide to put a clamp on their
purchases all together, Wilson said the local economy could be
in for a bumpy year.
“I think some businesses could be
affected. Something would have to give, whether it’s the
number of employees or the amount of merchandise bought (by
business owners) each year,” she said. “People may spend more
money because of the drop in property taxes and (businesses)
would be OK, but how are you going to know?”
She said
legislators could find out more information from their
constituents before making a final decision they might later
regret.
“Instead of rushing legislation through, maybe they
could do polls of different people at different income levels
and see how they feel,” Wilson said.
But area lawmakers say
their constituents have expressed a strong desire for property
tax reform, and an increased sales tax is one of the only ways
for the state to compensate for those lost funds.
“Maybe
consumers will be more frugal, but (increasing sales tax) is
the only option we have if we want to reduce property taxes,”
said state Rep. Gene Pinson, R-Greenwood, adding that, though
the proposed sales tax increase would likely be 2 or 3
percent, even a “1 percent increase would be considered major
by a lot of folks.”
Pinson said the issue is something that
is the topic of a “lot of discussion” in the S.C. House of
Representatives and Senate. He said the version of the bill
the House passed eliminates school operational taxes from
owner-occupied residential property taxes, leaving the state
to have to generate that revenue.
Pinson said the
elimination of sales tax on groceries could be a way to
“soften the burden” on consumers. “They will witness an
increased sales tax on their other purchases, so this would
give them a break on food,” he said.
The elimination of
grocery sales tax is something state Rep. Mike Pitts,
R-Laurens, wants to see happen as well, along with the
elimination of operational school millage paid by property
taxes and reassessment of property at point of sale. He said
the House pushed an extremely aggressive property tax reform
bill to the Senate to get legislators to move on the
issue.
State Rep. Anne Parks, D-Greenwood, said she knew
some people in the business community were not pleased with
the proposed sales tax increase, admitting that the House’s
decision to eliminate school operational tax on owner-occupied
homes could have been rushed.
Parks said she thinks the
property tax reduction needs to be across the board to help
all property owners. But she added that, because the proposal
would require a constitutional amendment, the constituents
also will have a voice in the issue, as they will have the
option of voting on the proposal when they go to the
polls.
Megan Varner covers general assignments in
Greenwood and the Lakelands. She can be reached at 223-1811,
ext. 3308, or: mvarner@indexjournal.com
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