A special state House committee is working to streamline the tax code, including a proposal to reduce the sales tax from six to three percent and to nix approximately 80 exemptions.
Under the proposal, which must clear the committee before heading to the House budget writing committee, shoppers would begin paying sales tax on unprepared food.
While purchases under the Supplemental Nutrition Assistance Program are exempt from sales tax under federal law, a lowered sales tax could burden poor and low middle-income families—who don’t participate in, or are ineligible for the program—with higher grocery bills.
The committee is set to take action next week.
“This is the conversation starter to make sure everybody understands what is possible,” said Rep. Bill Taylor, R-Aiken, on Thursday.
If adopted as-is, the lowered sales tax could disproportionally hurt low-income families.
Food insecurity for low-income families—who are eligible for SNAP, but do not participate—increases when groceries are taxed, according to a 2016 study led by Auburn University professor, Norbert Wilson.
That’s because low-income families spend a greater share of their incomes on food, compared to middle-income families.
Low-income households spent $3,862 on food in 2016, on average—approximately 32 percent of income, according the the U.S. Department of Agriculture. By contrast, middle-income households, spent $6,224, or 13.1 percent of income, on food.
The proposal would phase out exemptions over five years, beginning in 2023. Budget writers, however, will decide whether to renew certain exemptions.
Under a separate proposal, the committee structured a flat 4.85 percent individual income tax with standard deductions. Currently rates range from zero to seven percent of taxable income. That proposal is revenue neutral.
“We made [sales tax] as sterile as we could make it, and I think that’s the best position to hopefully build good tax policy through the Ways and Means Committee,” said House Speaker Pro Tem Tommy Pope. The York Republican heads the committee.
A detailed look at the House’s proposed sales and exemptions plan is available at scstatehouse.gov.
The committee plans to revisit streamlining the property tax code.
Image source: USDA