Eliminating credit card fee on taxes would force tax increase, treasurer says

zmurdock@beaufortgazette.comMarch 12, 2014 

A tax increase would be inevitable if state lawmakers prohibit local governments from charging a fee when people pay their taxes with a credit card, according to the Beaufort County treasurer.

To offset the processing fees credit card companies charge the county, taxpayers settling their bills with a credit card are charged an additional 2.75 percent, Treasurer Doug Henderson said.

"If I don't charge those fees, taxes are going to have to go up because (the county) will have to cover that cost," he said.

Eliminating the fees charged to taxpayers is a provision in the S.C. House of Representatives' 2014-15 budget proposal. It's being sponsored by Charleston-area lawmakers.

Reps. Leon Stavrinakis, a Democrat, and Jim Merrill, a Republican, say the fees are an unfair burden, especially when some taxpayers are taking on credit card debt to pay their taxes.

But removing the fee would mean every taxpayer has to pay those fees when the county is forced to absorb the costs, Henderson argues.

Those costs likely would rise to more than $1 million in Beaufort County, he said.

In 2010, before the fee was charged, the county racked up nearly $1.2 million in credit card processing fees. When Henderson became treasurer in 2011 and began charging those who paid the county with a credit card, those charges dropped to less than $470,000, Henderson said. Processing charges are now less than $260,000 for taxes collected nine months into this fiscal year, he added.

The fee is charged to anyone who makes a credit-card transaction with the county, but those savings are primarily because fewer people are paying large tax bills with credit, Henderson said.

The charges would likely skyrocket again without the fee, which he says deters some wealthier taxpayers from paying with credit to take advantage of incentives such as frequent-flier miles.

The budget provision would only prohibit charging the fee to those paying property taxes with a credit card, and the county could continue to charge the fee on other credit card transactions, Henderson said.

The county also charges a flat $3.95 fee for taxes paid via debit card and a $2.50 fee for electronic checks, Henderson said. Those fees were also implemented in 2011 to cover processing costs.

The budget provision only mentions credit cards, but Stavrinakis said debit cards could be added.

While electronic payments have helped improve collection rates, those efficiencies aren't enough to cover processing costs, Henderson said.

"The thing that really bothers me about it is that you and I and those who don't use a credit card will be paying for that privilege" for others, he said. "It's going to be a costly issue to the taxpayers if it's passed."

The (Charleston) Post & Courier reporter David Slade contributed to this report.

Follow reporter Zach Murdock at twitter.com/IPBG_Zach.

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