Like a good stock portfolio, a good tax system relies on a balance, with different types of taxes behaving differently throughout the economic cycle, and affecting different types of people in different ways. For both stability and fairness, economists agree that the best state tax system relies about equally on the income tax, the sales tax and the property tax. South Carolina already relies less on income taxes than the sales or property tax. Cutting income taxes by more than 15 percent would further unbalance our tax system.<\/p>\n
Our sales tax, by contrast, is the 16th highest in the nation. The main reason it\u2019s so high is that it\u2019s all about mollifying special interests by giving them special tax breaks. We exempt more than we tax: We have around 120 exemptions written into law, and on top of that we tax far fewer services than most states. House members say they can cut the state sales tax from 6 percent to 3 percent if they address both of those problems, and technically that\u2019s true. The problem is that they\u2019re not going to tax all goods and services, and they probably shouldn\u2019t, because some prevent taxing the same thing twice, and some of the biggest exemptions (think electricity and groceries) serve primarily to make the sales tax a little less regressive than it otherwise would be.<\/p>\n
Still, any effort to eliminate some exemptions and tax more services \u2014 and use the additional revenue to cut the tax rate \u2014 would be a smart step toward a lower, flatter tax system, one that is less volatile and more fair. Which is the opposite of where cutting the income tax rates \u2014 and creating yet another large tax exemption \u2014 would take us.<\/p>\n