No need to rush vote on proposed sales tax

info@islandpacket.comJune 16, 2013 

Beaufort County Council made the right choice in turning down a request for a referendum on a new sales tax this November.

Special elections, particularly in an off year, don't attract many voters, and when you're talking about a 1 percent sales tax that has no end date and no dollar-figure goal, it's important that as many people as possible weigh in on the question.

Other sales taxes available to local governments require that a referendum be held in a general election year. That's a good policy, and one the county was right to follow.

Some county municipalities are pushing for the "local option sales tax" because they want a new source of revenue to make up for an expected drop in property tax collections after this year's reassessment, which comes on top of the tax-raising restrictions already under state law. The sweetener is property tax relief.

But the tax is not a sure thing. Passing a sales tax referendum in Beaufort County hasn't proved easy. The local option sales tax was voted down in 1990, the first year it was available, and again in 1991. It took the county three tries to get a sales tax for road projects approved when fast-paced growth was clogging our roads. Voters turned it down in 2002 and 2004 before saying yes in 2006. Each referendum involved a new dollar figure and set of projects.

There's another reason to be reluctant about holding a referendum just five months from now. Voters and local officials must understand the full impact of this tax and how it works. It's not as straightforward as other sales taxes: Collect a tax until this date or until this amount of money comes in and use it for this purpose.

And because it is imposed indefinitely, local officials should be wary of its impact on other potential sales taxes for other purposes. They should think carefully -- as should voters -- about the cumulative impact of a 6 percent state sales tax, which could go up with no input from us, as well as the 2 percent hospitality tax, the 3 percent local accommodations tax and the 2 percent state accommodations tax, all sales taxes by another name. Visitors, too, would pay this tax, and most of them wouldn't see any property tax relief. But the tax is money out of their vacation-spending pockets.

And it won't be easy making spending decisions involving local option sales tax revenue. The volatility of sales tax collections must be taken into account. The Municipality Association of South Carolina describes predicting how much money would be available for property tax relief as "shooting at a moving target."

After multiplying the sales tax rate by our purchases, a lot of division comes next.

  • Seventy-one percent of the money collected must go to property tax relief. Of that, 67 percent goes to the county and 33 percent goes to municipalities. The 33 percent is divided among municipalities based on their populations.

  • Twenty-nine percent is new money that can be spent any way the local governments want. Fifty-percent of it is divided up based on the location of the sales and 50 percent on population.

  • Then there's figuring the tax credit. The property tax credit has nothing to do with property tax rates -- low, high or in-between. It is based on the amount of sales tax revenue that comes to the local government for tax relief divided by the total appraised value of property in that jurisdiction. That factor is multiplied by the appraised market value of your property to determine your individual property tax credit.

    And the tax won't be easy to get rid of. To get a question on the ballot about rescinding the tax, 15 percent of registered voters in the county must sign a petition asking for the referendum.

    There's also the regressive nature of a sales tax. People with limited means spend a lot more of their income on things that are subject to a sales tax. We're aware that visitors to Beaufort County would pay a large share of the amount collected, and that's good for people who are looking for new ways to get money and have no problem finding ways to spend it. And, yes, the tax credit would reduce your property tax bill, although it's hard to say whether you will get back more through the credit than you will pay out due to the sales tax.

    But the number of people vacationing here -- whether it's two people or 2 million people -- won't change what you pay at the cash register with a new sales tax.

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