Lowcountry mayors oppose business license bill that would cut millions from local budgets
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A new business license tax bill South Carolina legislators are considering could leave a multimillion-dollar hole in local government budgets, according to officials in Beaufort County.
The bill, HB 4431, would revamp how municipalities calculate business license taxes — a function that accounts for 12% of Bluffton’s $33 million budget, 22% of Beaufort’s $17.8 million budget and 24% of Hilton Head Island’s $79 million budget.
It would cut the amount of license taxes businesses pay, basing the fees on net income rather than gross revenue.
Amid an election year, the bill would allow state lawmakers to say they cut taxes while requiring municipalities to live with the reduction in income — or increase the tax rate used to assess businesses.
Local leaders say the bill also would reduce their ability to raise money.
“Little by little, state government is diminishing and rendering less effective our authorities and powers,” Hilton Head Island Town Council member Tom Lennox said at a Tuesday council meeting.
He referenced the Home Rule Act of 1975, which gave local governments some independent authority in taxing powers, appointments and land use.
“Prior to home rule in South Carolina, the General Assembly exercised nearly total control over local governments,” according to the South Carolina law encyclopedia.
Whether the bill would decimate local budgets remains to be seen, since businesses are taxed differently according to category and municipality.
Hilton Head, for example, has 37 different classes of business tax classifications. Bluffton has 22 and Beaufort has eight.
Local officials, including Hilton Head Mayor John McCann and Bluffton Mayor Lisa Sulka, are reportedly drafting a letter to mayors across the state to encourage them to oppose the state bill, Lennox said.
Under the proposed model, most businesses would pay reduced license taxes because they would be calculated based on the amount left after yearly expenses are subtracted from yearly profit.
Kathy Todd, finance director for the City of Beaufort, said the bill would “significantly impact” the city’s operations and general revenues.
“We’ll have to cut services because there’s nowhere else to go,” she said Thursday.
Local governments reported the following amounts for business license tax revenue in the most recent fiscal year:
Town of Bluffton: $1.9 million
- City of Beaufort: $4 million
- Town of Hilton Head Island: $10.3 million
S.C. Sen. Tom Davis, who represents Hilton Head, Bluffton, parts of Hardeeville and Beaufort, said he supports the bill because license taxes would be more equitable across different types of businesses.
Asked about changes in municipalities’ revenue, Davis said the bill also allows local governments to change the percentage at which they can assess business license taxes.
That means that municipalities could increase the tax rate to make up for a deficit in their budgets.
Davis acknowledged that many local leaders shy away from raising taxes.
The bill, which is sponsored by Rep. Wallace Jordan, a Florence Republican, and has 18 co-sponsors, is still being debated in House committees and has not been introduced in the Senate. If the House and Senate don’t pass the bill by the end of the 2020 session, it will need to be re-filed in the following two-year session beginning in 2021.
The S.C. Chamber of Commerce, which has identified lowering taxes for businesses as one of four main objectives for 2020, supports the bill.
