Breaking down the sales tax

The tax

1 percent.

Revenue

An estimated $8 million. Individual savings would depend on property value and sales tax paid.

Distribution

5 percent: of the total revenue could be withheld by the state to be distributed among counties with a local-option sales tax with low revenue.

remaining revenue: At least 71 percent to property tax relief as a tax bill credit based on property value; 29 percent to property tax relief or other county and municipal uses. Dorchester County Council has committed all its first-year proceeds to property tax relief; the resolution must be re-voted on each year.

of the 71 percent: 67 percent to county property owners; 33 percent to municipal property owners, based on population. Municipal property owners would receive the county and municipal credit.

The ballot question

“Must a one percent sales and use tax be levied in (Dorchester) County for the purpose of allowing a credit against a taxpayer’s county and municipal ad valorem tax liability and for the purpose of funding county and municipal operations in the (Dorchester) County area?”

A “yes’ vote is a vote for the tax.

Sources: Municipal Association of South Carolina, Dorchester County, S.C. Legislature

If Dorchester County passes a local-option sales tax next week, the people most apt to be hurt are renters. The reason: Property owners who rent to them don’t always use their tax savings to cut rental rates, officials say.

Learn more

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But based on what has happened in Berkeley and Charleston counties where they have approved the tax, paying an extra one-percent sales tax doesn’t sting for many owners when compared with the benefits of the property tax credit they get.

The Berkeley County tax was a big issue before the 1996 vote that approved it, said County Councilman Caldwell Pinckney Jr., who represents the rural Cross area. After it passed, “nobody ever complained to me. Not once did I get a complaint. People didn’t miss (the one percent). They enjoyed the (property) tax benefit.”

Dorchester County voters face a referendum on the tax in the Nov. 5 election, but they’ve rejected it at least three times in the past. As before, it has ignited heated opposition among a range of groups, from anti-tax associations to the county Democratic Party. Charges are flying and tempers are flaring.

That’s what happened in Berkeley and Charleston counties too.

Yet despite the outcry against the tax in both counties, few complaints were heard once it was in place. Threats to get the Charleston County tax rescinded after it passed in 1990 never were followed through.

The squeeze

The sales tax, though, hasn’t given property taxpayers all the relief that might have been expected. When the recession in 2009 squeezed sales — and tax revenue — Berkeley and Charleston county property owners came up short on their tax credits, even though Charleston County froze hiring and did not buy equipment to pare its budget. Berkeley County moved a large chunk of the sales tax revenue from property tax relief to equipment purchases and other uses, after a previous County Council had promised not to do that.

Hair thin

In both counties, opposition to the tax roughly was the same: People said it would be unfair to lower-income residents, and they derided it as a “smokescreen” so legislators gradually could raise taxes again to spend more money.

The sales tax, while just a penny on the dollar, does add up, and it’s charged for a number of everyday purchases, including groceries.

Both county governments had to make repeated tries to get the tax passed, and the margins were hair thin. Berkeley County passed it by 127 votes in 1996.

Charleston County passed it in 1990 by only 27 votes of more than 56,000 cast. Opponents then challenged 50 of the votes, trying unsuccessfully to stop passage. A state legislator introduced a bill to repeal the tax because of the narrow margin, but it died in committee.

Sales increased in June 1991, the month before the tax was enforced, but analysts couldn’t say how much of the jump was from people trying to beat the tax and how much simply was a result of seasonal tourism spending.

Then, as county leaders squirmed, tax revenue started coming in lower than expected. But the reason soon revealed itself: The economy had gone into recession. Revenue eventually rose.

Maybe the biggest and most valid concern about the tax was that it hit businesses harder because businesses tend to spend more and the property tax relief is more modest. Many companies have a fee-in-lieu-of-taxes arrangement with local governments.

Sandy Mars, of Atlantic Equipment and Supply in North Charleston, campaigned against the tax and said publicly he would move his company if it passed. Mars didn’t, but he sold the business not long after. The Medical University of South Carolina negotiated a lump-sum payment rather than pay the tax.

Good, bad and ugly

Dorchester County Council has voted to commit all the sales revenue to property tax relief, but that vote must be taken again each year.

Tax relief or not, county property tax bills might still rise. Voters are on the hook to pay for $180 million in bonds to build four new Dorchester District 2 schools. Property tax reassessment is on the way and, while the council regularly has adjusted the tax rate to offset increases in property values, they have climbed since the last assessment.

So the bottom line for a local-option sales tax is that it’s good, bad and ugly.

Not until Berkeley County committed all the revenue to property tax relief did voters pass it, said former county supervisor Jim Rozier.

“When you make promises to people and following councils take them away, that’s unfortunate. Voters passed it expecting something totally different than it turned into,” he said.

Pinckney said the move was needed to keep providing resident services.

“I realize it’s supposed to go to property tax relief, but unexpected things come up. I see it as a credit card for emergency situations,” he said.

In Charleston County, the tax “is our second or third largest revenue source, and it’s the most volatile,” said Keith Bustraan, deputy finance administrator. “I know it’s difficult, and there’s a lot of suspicion. But it’s worked out pretty good for Charleston County.”

Reach Bo Petersen at 937-5744, @bopete on twitter or Bo Petersen Reporting on Facebook.