While touting itself as a business-friendly state, South Carolina uses a formula that makes its property taxes on manufacturers the highest in the nation, according to a panel appointed by the legislature.
The state Tax Realignment Commission is recommending that the General Assembly put forward a constitutional amendment lowering the assessment ratio for manufacturers' property taxes. It notes that in 19 rankings done by the Minnesota Taxpayer's Study, including rural and urban businesses, and companies with small, medium and large facilities and equipment, South Carolina ranked highest in all 19 categories.
While many manufacturers work out agreements with local governments to pay fees in-lieu of taxes at a lesser rate, those account for a smaller portion of revenue than those that pay property taxes, according to the report.
In the 2008 fiscal year, manufacturers that had fee-in-lieu-of-taxes agreements paid $192 million compared with $329 million for those that had no such agreements.
Meanwhile, the corporate income tax, which Gov.-elect Nikki Haley has insisted must be lowered to make the state competitive in attracting business and industry, is "one of the lowest" in the region and the nation, the TRAC report says.
The report is at odds with some politically popular views, noting that, "with few exceptions, TRAC found that South Carolina is a low tax state compared to its neighbors, the region and nationally by almost any honest measure."
But in addition to having the highest property taxes in the nation on manufacturers, it has "some of the highest" in the nation on commercial and industrial property, the report says.
And the state's sales and use taxes, at 6 percent, are tied for 13th highest in the nation, the report notes. That's due largely to the fact that only 38 percent of gross sales are subject to sales tax, it says, with exemptions on such things as Internet sales, prescription drugs, electric bills, unprepared groceries, and a $300 cap on automobile sales taxes.
TRAC recommends repealing more than 60 of those 80-plus exemptions, exclusions, caps and discounts that add up $2.7 billion.
The commission's 240-page report, however, appears likely to gather some dust before the legislature does much with it.
"While a lot of it makes sense dollar-wise, politically I don't think it'll work," said state Rep. Dan Cooper, chairman of the House Ways and Means Committee.
That's because of the recommendations to start charging sales taxes on items not now taxed, he said.
"I think we'll look at it," he said. "I just don't think there's enough interest in the legislature to do it."