Rockey Burgess has 73 business licenses for the five South Carolina businesses he owns or co-owns.
Burgess, a Republican who also holds a seat on the Williamston Town Council in Anderson County, doesn’t know of anything at the state level that helps small businesses.
“There’s almost no advantages to starting a small business in South Carolina,” he says.
South Carolina’s corporate income tax rate is five percent, compared to a four percent rate in North Carolina and a six percent rate in Georgia.
A state House tax committee is mulling changes in the tax code that could relieve small business owners like Burgess.
“We love to shout, “we’re business-friendly,” and make you jump through hoops,” says Rep. Tommy Pope, House Speaker Pro Tempore.
The York Republican heads the committee, which is tasked with streamlining South Carolina’s tax code.
Small businesses, which Pope referred to as part of the fabric of the community, often can’t afford representation by lobbyists at the Statehouse.
“It seems like they don’t have a voice sometimes,” he says.
Many also lack the capital required by the state—$2.5 million—to lower their manufacturing or business personal property tax rates from 10.5 percent to six percent over 20 years.
“We’re not on an even playing field,” Burgess says.
After months of hearings and of combing the fractured code, the committee is set to begin working out its plan later this year.
The committee’s scope includes income, sales and property taxes. Members are also considering changes to business licensing and education funding, which educators say has been pinched partly because of a 2006 law that exempted the value of primary residences from funding school operations.
Business owners also say they have shouldered the burden of that law.
But can lawmakers give the business community relief without disproportionally hurting homeowners? “Therein lies the rub,” Pope says.
While homeowners wouldn’t lose the school operations exemption, according to Pope, local taxes on owner-occupied property might increase if lawmakers adjust that part of the code. But he wonders whether they would increase above their pre-Act 388 threshold.
The committee is also weighing the possibility of nixing certain sales tax exemptions. Offsetting property taxes with increased sales tax revenue is another consideration for Pope.
But manufacturers caution against slashing exemptions.
Lewis Gossett, president of the South Carolina Manufacturers Alliance, in October told the committee he thinks economic development would stop for a time because of uncertainty caused by legislators taking stock of sales tax exemptions.
Gossett did not respond to a phone message left Wednesday at his office.
Pope hopes the committee can trim enough to prevent another Bodman-like lawsuit in South Carolina. The 2011 lawsuit was based on an allegation that the number of exemptions and caps on the state’s six percent sales tax made those exemptions and caps unconstitutional. The state exempts sales tax collection in 78 categories—including groceries—and caps sales tax on other purchases. Car sales tax, for instance, is capped at $300.
The state Supreme Court upheld the exemptions in 2013.
Burgess favors a flat sales tax in lieu of the income tax.
Tax rates under review
7 percent—top marginal rate on annual incomes over $14,550. Officials say that after exemptions, the rate is effectively as low as 2.99 percent.
6 percent, excluding exemptions. Local governments may also institute local option sales taxes or hospitality taxes to fund local needs.
Property—percentage of taxable value
4 percent on primary residences
6 percent on other residential and commercial
10.5 percent on manufacturing