one cent tax

A Berkeley county sign on Murray Drive in Hanahan touts the counties 1-cent tax for infrastructure. Brad Nettles/Staff

South Carolina's deep embrace of sales taxes shows no sign of relaxing, with all but three of 46 counties now imposing local sales taxes on top of the statewide 6 percent.

A penny here, a penny there, and before you know it you're paying 11 percent tax on a cup of coffee. That's the sales tax burden in Charleston, including the "hospitality" sales tax on prepared food and beverages.

It all started in 1951, when South Carolina lawmakers approved a 3 percent statewide sales tax which survived a challenge that went to the state Supreme Court. The state's tax rate later increased to 4 percent, then 5, then 6 in 2007.

Along the way, locally imposed sales taxes started to appear. Add the local taxes for roads, schools, property tax relief and other purposes, and the total general sales tax rate in most counties rises to 7, 8 or 9 percent.

At first, it was just county-level "local option" sales taxes, which are voter approved and used to reduce property tax bills. The last increase in the statewide sales tax was also for property tax relief and shifted a large amount of public school funding from property taxes to the sales tax.

“I think people like the idea of offsetting their property tax with the sales tax," said Tim Winslow, executive director-elect of the S.C. Association of Counties. “People like to pay in increments, as opposed to a big bill."

One downside is that sales taxes can be very sensitive to economic conditions, as South Carolina learned during the Great Recession. The extra 1 percent of statewide sales tax that was supposed to fund education in place of reduced property taxes fell far short of closing the gap during the recession and left the state with a budget hole to fill at a bad time.

At the county level, the first local-option sales taxes used to reduce property taxes were imposed in 1991. Later came added local sales taxes for roads, capital projects, school construction and tourism development.

Today, South Carolina counties have local sales taxes as high as 3 percent, in addition to the state's 6 percent. That's not counting the additional 2 percent collected on prepared food and beverage in many areas, or the extra tax some counties and cities collect on hotel stays.

According to the Tax Foundation, South Carolina this year has the nation's 17th-highest combined state and local tax rate, and the highest on the East Coast south of New York.

bus1 NAHS aiken works schools.jpg (copy)

Students at North Augusta High School fill the bus pick-up area at the end of the school day on Thursday, Jan. 17, 2019. North Augusta High, which is about two miles from the South Carolina-Georgia border, is one of the four schools Aiken County has renovated after increasing its sales tax to pay for education projects. Wade Spees/Staff 

Voters often approve

The local sales taxes are approved through voter referendums, and residents seem to like them — particularly when the alternatives are higher property taxes or doing little about overcrowded roads and schools. 

“We had pretty much raised the property tax as much as the law allowed," said Jackie Broach, Georgetown County's public information officer. 

Georgetown County voters in 2014 approved a 1 percent sales tax that just ended May 1. The tax raised $41 million that's been used for dredging, road paving, a fire station and new substations. Now that the tax is gone, the county will likely ask voters to bring it back.

“We probably will, in 2020," Broach said.

Business and real estate groups are typically among sales tax advocates because the alternative, property taxes, hits commercial properties hardest and raises the cost of owning real estate. Last year, the state Chamber of Commerce released a proposal from a conservative think-tank that called for applying the state's sale tax to items that are now exempt, including groceries, in order to fund the elimination of the state's corporate income tax and slightly reduce the sales tax rate.

When Charleston-area mayors, county officials and state lawmakers gathered in 2016 to support a referendum adding another half-percent to the county's sales tax rate to support $2.1 billion in road projects over 25 years, they were joined by representatives from the Charleston Metro Chamber of Commerce and the Charleston Realtors Association.

A regressive tax

The Coastal Conservation League opposed Charleston County's $2.1 billion sales tax. The nonprofit group is fighting plans to complete Interstate 526 and was driven by concerns about the projects which the extra tax money would be spent, but also made points about tax fairness.

"The referendum puts the local sales tax rate at 9 percent — higher than the cities of Atlanta, Charlotte, and New York City — raising $2.1 billion over twenty-five years," said the League. "This type of tax hits the working poor and seniors on fixed incomes the hardest."

The League took issue with the potential uses of the tax money and the oversight. That's been an issue in several counties because no matter where the money comes from, spending it wisely is still up to local politicians.

Charleston County voters narrowly approved that tax increase, with 51 percent of the vote. That tied the county for the highest combined state and local sales tax rate in South Carolina, along with Jasper County and the Myrtle Beach portion of Horry County.

At the other end of the tax spectrum is Greenville County, which along with Oconee and Georgetown counties has no locally imposed sales tax.

“I don’t think we’ve been deprived," said Greenville County Councilman Bob Taylor, chairman of the Finance Committee. “We don’t look for ways to raise revenue, unless we have expenses we can’t meet."

He said the county tries to manage growth-related needs with good planning, including requiring developers to pay for road work needed because of new subdivisions. There have been sales tax referendums in Greenville County, but voters have rejected the tax increases, most recently in 2014.

"They haven't even been close," Taylor said.

Most coastal counties now have transportation sales taxes, which allows them to extract money from millions of annual tourists as well as residents to pay for road work. Most inland counties, 21 of them, have capital projects sales taxes for specific needs.

Saluda County voters approved a 1 percent capital projects tax in the November election, for example, primarily to pay for a new county jail. 

Temporary turns permanent

Local sales taxes often start as limited-time taxes with expiration dates. However, when the time period ends, the extra tax is typically renewed because there are always more roads and schools to build.

Consider York County, a fast-growing county in northwestern South Carolina that's grown rapidly as a suburb of nearby Charlotte. York County introduced the state's first local sales tax for roads, in 1997, aimed at raising just under $100 million.

That tax was reimposed to fund additional transportation programs in 2003, 2011 and 2017. Each time, voters strongly supported the tax, most recently with 78 percent of the vote.  

“What’s really interesting is, invariably taxpayers will vote to reimpose it at larger margins than the original tax," said Winslow, with the S.C. Association of Counties. “I have no idea why that’s true."

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Reach David Slade at 843-937-5552. Follow him on Twitter @DSladeNews.

David Slade is a senior Post and Courier reporter. His work has been honored nationally by Society of Professional Journalists, American Society of Newspaper Editors, Scripps foundation and others. Reach him at 843-937-5552 or dslade@postandcourier.com

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