State should keep out of local business licenses

House Bill 3650 regarding business licensing recently filed in the General Assembly would change the method and collection of business license fees.

For the past year, the Municipal Association of South Carolina has been working with statewide business interests to create a compromise bill that would standardize classifications and collection dates and create an online portal through the Municipal Association in an effort to alleviate confusion.

We thought we were making good progress for addressing those concerns; however, Bill 3650 that was introduced Feb. 2 is a departure from the compromise bill and would allow the Secretary of State’s office to be the collecting agency. Needless to say, this is troublesome.

In the early 1990s, the municipalities and counties of South Carolina agreed to work with the state legislature in an effort to consolidate a series of locally collected fees/taxes that would be handled by the state and then disbursed to the counties, cities and towns through the Local Government Fund. It was supposed to be revenue-neutral and simplify a very complicated problem.

That fund has not been funded fully by the state since 2008.

Because of this, local governments have had to increase local property taxes and other fees to offset the loss of revenue that was promised by the state. That fund has been used by the state to address its budget at the expense of local residents and property owners. The lack of funding, which was required legislatively, has equated to anywhere from 2 to 5 additional mils of tax burden to local property owners each year.

Now, because of the concerns raised by a handful of business interests, town, county and city residents and property owners across all of Beaufort County will be asked to once again make up a potential revenue shortfall created by this bill or realize reduced services, which include police, fire, garbage, yard debris cleanup and various other tasks performed by local governments.

We simply do not trust that the state will honor its pledge to ensure that the bill will be revenue-neutral and that this source of revenue will not once again be a source of funding to offset budget shortfalls at the state level.

I wish we could be more trusting, but the track record on these negotiated agreements is not good. Act 388, which effectively transferred budgeting authority to the state from local hands, has also become a burden to local residents and taxpayers.

We understand the need for fiscal responsibility and easing the burden on businesses, but we also have an obligation to serve our local residents and property owners. The state continually handcuffing our authority and redirecting our revenue to its coffers has made this extremely difficult.

We are a state that has lamented federal overreach and the need to be provided more autonomy. Why doesn’t this same philosophy flow to the local governments that deal most directly with residents and voters? Are we once again going to shift an additional tax burden to local property owners to accommodate special interests?

What’s even worse, the bill as drafted favors certain businesses, potentially at the expense of locally owned businesses. Who exactly is the state legislature trying to help?

A couple of examples were cited by our town manager, Van Willis.

It exempts 25 percent of a business’ income that is collected outside of the municipality where the business maintains its principle place of business.

▪  Imagine Wal-Mart, with its headquarters in Arkansas, paying a business license tax on only 75 percent of its income when the small business owner struggling to compete with the industry giant is paying on 100 percent.

▪  Imagine a restaurant with locations in three cities. The owner pays the tax to City A on 100 percent of his income earned from the restaurant in City A. However, he exempts 25 percent of the income earned on the two restaurants located in City B. At the same time, his competitor pays the municipal business license tax on 100 percent of his income earned because all three of his restaurants are located in the same city.

This story was originally published February 15, 2017 at 12:08 AM with the headline "State should keep out of local business licenses."