The State: Let Locals Exempt Groceries Too

South Carolina's state sales tax doesn't apply to groceries anymore. This is a big deal for low-income consumers, who are hit hardest by the sales tax on groceries in the dwindling number of states that still apply it. But it's also a big deal for state coffers, because groceries are typically between 10 and 20 percent of the state sales tax base in states that tax them.

In other words, exempting groceries is a progressive move-- but only if you can afford it.

In a July 31 editorial, the State's editorial board does a nice job of describing these conflicting objectives. Here it is:

It makes perfectly good sense for the General Assembly to declare that some types of taxes will not be collected in South Carolina, by either state or local government. Grocery taxes should be one of them.
But it’s not just as simple as waving a magic wand, or at least it shouldn’t be. That cap that lawmakers passed last year on how much property taxes can be increased each year means that if counties stopped collecting sales taxes on groceries, many would not be able to make up the loss by raising property taxes. They wouldn’t have anywhere else to turn for the money either, because of the stringent limits the Legislature has previously placed on both the types and the amounts of taxes and fees that local governments can raise as an alternative to property taxes. So eliminating local grocery taxes would mean a sharp drop-off in the amount of money they have to pay for police and fire protection and other local services.

Progressives often forget that there are two sides to this coin. The State deserves kudos for reminding us that even the most progressive tax cut has costs-- and that these costs can be unaffordable.

In states that have both state and local sales taxes, this decision can be just as wrenching for local governments as it is for the state-- and, as the editorial points out, it can be even worse for locals because they have less diverse taxing authority than does the state. But there's an added wrinkle in South Carolina: locals didn't even get to make this decision.

The way state law is written, their only choice is to collect a local sales tax that includes the grocery tax or to not collect a local sales tax at all — an unlikely enough choice even before lawmakers slapped a property tax cap on local governments last year.
The least the Legislature should do is allow counties to exempt groceries from their local option sales tax.

Not to sound like a broken record, but the State is right on again. South Carolina locals should be given the ability to decide whether their sales tax rules stick out like a sore thumb compared to the state. It won't be an easy decision-- but at least it's a call they get to make.