S.C. Supremes Toss Education Funding Case

(CN) - The South Carolina Supreme Court threw out a lawsuit challenging billions of dollars in sales tax breaks that reduce funding for education.

"Recent data show that as a result of these numerous exemptions, South Carolina now exempts more sales taxes than it collects," the court conceded in its ruling.

South Carolina imposes a statewide 6 percent tax on retail sales, with the proceeds to support education, including money for school districts in lieu of certain property taxes.

Over the years, the General Assembly has passed a series of exemptions to and caps on the taxes. These include seven caps on the amount of the tax levied and 78 exemptions, on articles ranging from textbooks used in primary and secondary schools to water sold by public utilities.

Richland County resident Matthew Bodman, a father of two pre-school children, sued the state. He claimed the caps and exemptions violate the equal protection clause and the prohibition against special legislation in the state constitution.

S.C. Supreme Court Justice Kaye Hearn wrote for the court: "[Bodman] asks that we strike down the exemptions and caps in toto because the number of them has grown to the point where they no longer bear a rational relationship to the purpose of imposing the tax in the first place."

But the court found that Bodman failed to state a case because his arguments focused on the sheer number of tax exemptions and limits - which he said made them "arbitrary and thus unconstitutional" - rather than on their worthiness.

"Moreover, he points to the wide range of transactions which fall under these statutes as evidence of a lack of a 'cohesive scheme,' which accordingly makes the entire group arbitrary and presumably lacking in a rational basis," Hearn wrote. "Yet, in no uncertain terms he argues that the scheme must stand or fall as a whole based solely on the number of 'patchwork' exclusions and caps. He even went so far as to explicitly decline the Defendants' invitation to examine whether individual exemptions and caps are supported by a rational basis.

"By expressly declining to offer proof as to the basis underlying any of the classifications created by sections 12-36-2110 and 12-36-2120, the manner in which Bodman has presented this case for our review precludes us from determining whether the exemptions and caps violate equal protection."

In a concurring opinion, S.C. Chief Justice Jean Toal said the ruling does not foreclose a challenge based on the content of individual exemptions and caps.

"In my opinion, many of these exemptions and caps could not withstand even a minimal level of scrutiny under an equal protection analysis," Toal wrote.

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