The South Carolina Chamber of Commerce is encouraging state lawmakers to reform the tax code this legislative session.
“It’s not a code that was developed intentionally,” President and CEO Ted Pitts said. “It’s been piecemealed together over decades. We’d like to take an approach to tax reform that looks at the tax code holistically and tries to address some of the issues that lie inside it.”
Among their objectives: analyze the state’s tax system at the state and local level, identify issues that need reform to foster business growth and economic prosperity, and develop recommendations to make South Carolina’s tax code more competitive for workers and businesses.
The chamber says the state’s business tax climate is ranked 37th in the nation by the Tax Foundation.
Pitts said the code needs to be revised to bring policies addressing sales, income and business taxes up to 21st-century standards.
“South Carolina has the narrowest sales tax bases in the country and the economy has changed,” since the state sales tax law was last updated, Pitts argued.
Pitts also said the top marginal income tax rate of 7 percent is taking South Carolina out of competition in the region unless relocating businesses negotiate a fee-in-lieu of taxes.
“It’s the highest in the Southeast,” he said. “Both North Carolina and Georgia were lower than us and are lowering their top marginal rates over the next several years to even become more competitive. So that’s something we need to look at as well.”
Pitts said property and business taxes need to be addressed also.
“Act 388, property taxes, which continue to push the burden of non-owner occupied real estate, the small business owner is getting hit harder and harder with the property tax bill,” he said. “Business license tax issue is just something that is — probably the least business-friendly business license tax system in the country.”
In all, Pitts said the code needs to be modernized and simplified.
“It needs to be easier and less cumbersome for the taxpayer to interact with it. There are high-burden costs that are put on individual filers as well as businesses that we need to simplify the tax code,” he said.
Pitts said there have been several legislative tax study committees over the past several decades. While there are 46 tax-related bills pre-filed for the upcoming legislative session, none are sweeping reforms. But Pitts is hopeful it will get done.
“We’re hopeful that policymakers realize that the state’s tax code is antiquated and needs to be updated and we’re hopeful that policymakers are going to address the issue.”