Playing with the Tax Code
Ever wonder why our sales tax is so high? Part of the answer can be found in this abandoned amusement park.
Earlier this week, one of our analysts was scrolling through the South Carolina tax code chapter on sales tax exemptions. The code exempts scores of things: hearing aids, coal, motor fuel, railcars, farm machinery, durable medical equipment, livestock, solid waste disposal bags, and many other items.
One of those other items is an odd one: amusement park rides. That’s right – amusement park rides. Here’s the item in a long list of exemptions:
Amusement park rides; parts, machinery and equipment used to assemble, operate and make up amusement park rides; and performance venue facilities and any related or required machinery, equipment and fixtures. A $250 million investment and creation of 250 full-time jobs and 500 part-time or seasonal jobs over a 5 year period is required.
Here is a perfect illustration of why South Carolina’s tax code is an incoherent mess.
There is absolutely no objective reason why parts and machinery involved in the construction of amusement park rides should be exempt from sales tax. The reason for the exemption isn’t that lawmakers want to encourage the amusement park industry, or because that industry suffers from some unfair hindrance and needs a special exemption.
No, the reason for the exemption is that, several years ago, representatives from the restaurant chain Hard Rock Café wanted to build a Hard Rock-themed amusement park in Myrtle Beach. They approached state lawmakers, and the lawmakers, always eager to claim responsibility for “jobs,” were easily persuaded it would be a good deal. The deal struck between lawmakers and Hard Rock stipulated that the proposed Hard Rock Park would be exempt from sales tax on purchases of amusement park rides. Of course, lawmakers wrote the exemption so that it wouldn’t apply to just any company that wanted to purchase amusement park rides: it was only for a company prepared to make “a $250 million investment” and create “250 full-time jobs and 500 part-time or seasonal jobs over a 5 year period” – that is, Hard Rock Park.
The park was built. And it went bankrupt after a few months. New owners tried to make a go at it under the name Freestyle Music Park, and that went bankrupt, too. In short, it was a bad idea and a terrible investment.
But elected officials in Columbia thought it was a brilliant idea, and they were willing to change the state’s tax code to make it happen. The result? An embarrassment to the state and particularly to the Myrtle Beach area; wasted taxpayer-funded man hours of all the public officials who worked on the deal; and several million dollars in lost revenue.
Now, the lost revenue isn’t necessarily a bad thing in itself. What is a bad thing, however, is that every time the state gives away another exemption, it becomes that much more difficult to lower the rate on everyone else. Or to put it another way: Now that we’ve exempted these scores of items – prosthetic devices, newspapers, insecticides, sweetgrass baskets, anything purchased by a major motion picture company – all the non-exempt items have to supply the state with its accustomed level of sales tax revenue.
And that means you’re going to have to pay 6 percent sales tax – the 16th highest rate in the nation – for the foreseeable future.
Unless, of course, it’s a railcar you want to buy. Or solid waste disposal bags. Or livestock. Or an amusement park ride.