On the Money-Debt vs Savings (copy)

The SC Revenue Department doesn't charge extra to pay taxes with a credit card — which means the rest of us pay the bank charge.

If you try to get an informal extension or rack up some credit-card rewards by paying your federal income taxes with a credit card, you’ll pay nearly 2 percent extra.

Ditto local taxes. Charleston County, for instance, adds 2.5 percent to your property-tax bill if you pay it by credit or debit card. The state’s website, which provides online processing for credit card payments for traffic tickets and other payments, adds a $1 portal fee and 1.7 percent “convenience fee” for each credit card payment.

But put your S.C. income taxes on a credit card, and you’ll get all the benefits — a delay in having to actually hand over your money, and possibly some nice reward points — without any charge.

It’s not a matter of the IRS and local governments — and other state governments — being greedy. It’s a matter of the S.C. Revenue Department being ridiculously generous — with other people’s money. Our money.

Every government that accepts payments via credit card has to pay a portion of the amount collected to the credit-card issuer; how much varies from bank to bank. So does every business, every nonprofit — every entity. Most businesses absorb the cost. Or, more accurately, they spread it out to all the customers, including those who pay with cash or checks, by way of higher prices. That’s their right.

But where does South Carolina’s government get off thinking it has a right to spread the costs of credit cards to the vast majority of us who don’t pay our taxes with credit cards? This is offensive in all cases, but particularly when we’re subsidizing people who have the money to pay their taxes but choose to use a credit card in order to collect credit-card rewards. In essence, these people are making a profit off of their taxes — at the expense of the rest of us.

The (Columbia) State newspaper reports that the Revenue Department paid $22 million in credit-card fees last year to process about 200,000 tax payments. (The agency processes about 4.4 million returns a year.) Revenue officials defended their practice by saying they had absorbed the cost in their budget and negotiated the lowest possible fee rates with their payment processing vendor. They said that while no law requires them to give credit-card payers a free ride, there’s also no law that prohibits it.

We’re glad the Revenue Department was able to negotiate a low fee for credit card payments. But if the department is able to absorb $22 million in its budget, that tells us the Legislature is giving the agency $22 million more than it needs to do the job.

Lawmakers should cut $22 million out of next year’s budget to send a message. And to make sure the message doesn’t get lost in translation, they should require the Revenue Department — and any other governmental entities that might be following that agency’s practice — to start requiring people who use credit or debit cards to pay all costs associated with that practice. Yes, people should be able to pay their taxes with their credit cards. But the rest of us shouldn’t have to pay extra to facilitate that.