Policy Council Testifies on Sales Tax

South Carolina needs sales tax reform that is equitable and friendly to all businesses. The best way to achieve these goals is to lower the sales tax for everyone – both businesses and consumers – and eliminate all sales tax exemptions.

Reforming the tax code should begin with lowering the sales tax rate for everyone. This will not only increase private investment, it will end the sales tax incentives game that rewards inside players and penalizes everyone else. By lowering sales taxes for one industry, sales tax exemptions shift costs to other taxpayers, often those who are not "politically connected." Such exemptions also distort the free market. Most important, they provide only short-term, often political, benefits at the expense of long-term economic costs. In this way, they violate a basic principle of economics, but also of free democracy, which should be dedicated to safeguarding the good for all. As the famed economist Henry Hazlitt reminds us:

The whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence.

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Here, in South Carolina the long-term consequences of the politicization of the tax code are clear. Consider the following: