Vote NO: Sales tax hike could be a disaster for local economic growth

By Joe E. Taylor, Jr.

If a community is looking for a perfect recipe to put small businesses out of business, cause them to move elsewhere, or kill job creation, there may be no better example outside of California than what Richland County is proposing with the one percent sales tax hike, which voters decide on Election Day.

Supporters would like us to believe that a vote for the “penny” is a vote for more jobs, safer roads, and local control. However, the story they neglect to tell is the damage this tax increase would do to our local businesses and economy.

Over the next 20 years, it would take away a billion dollars that will be spent in local businesses and restaurants and put it in the hands of Richland County Council, which is growing government at an alarming rate. To be exact, in 2010 dollars, adjusted for population and inflation, local government expenditures in Richland County have grown from $1,814 per person in 1993 to $3,183 in 2010. That is a 75 percent growth rate per person over 17 years. Meanwhile, per capita personal income has only grown 19 percent per person.

One way this tax hike would harm businesses is by changing consumers’ buying habits. The higher sales tax would make it more costly to buy products or food in Richland County than in five neighboring counties, putting our local businesses at a competitive disadvantage. With a higher sales tax, consumers living on the borders of Richland County or who are making larger purchases are likely to go to neighboring counties to make those purchases.

An economic impact report funded by tax proponents and created by the firm Miley & Associates claims that 42 percent of the sales tax would be paid by people from outside of Richland County. This claim, however, is not an apples-to-apples comparison since it is based on a city-only example for the City of Milwaukee, rather than looking at county-wide buying patterns as we have in Richland County. The same Milwaukee study indicates that, if an area raises sales tax, some businesses may relocate and business expansion plans would be negatively affected. In fact, the Milwaukee study estimates that a one percent sales tax increase would cause an $84 million decrease in annual sales in four broad spending categories, but, ironically, this figure is not mentioned in the pro-penny economic impact report.

The bottom line is that Richland County businesses would lose sales and, with those sales, go our jobs. Money local businesses lose to their competitors because of a higher sales tax is money they cannot invest in growth or job creation.

A second way the tax hike would harm our job creators by raising the cost of doing business. Companies would pay one percent more on their utility bills and pay more for the goods and services they need to do business. These additional costs are on top of the high prices Richland County businesses currently are paying for taxes and fees. Local businesses already have higher property tax burdens than other metro areas in South Carolina. Additionally, Richland County is one of eight counties in South Carolina that charge business licensing fees. As it becomes more and more expensive to operate in Richland County, we are likely to see businesses and jobs go elsewhere.

Ultimately, this boils down to job creation. Continually raising the cost of doing business in Columbia and Richland County will run companies out of town. Instead, we must realize that these are still tough economic times and do everything possible to be a business-friendly community, ensuring that our own small businesses have the same opportunities to grow as other areas in the Midlands.

In counting the cost of the sales tax hike, we must account for the loss of private-sector jobs, income, and business transactions that will occur when money is transferred from the private sector to Richland County Council. With the economy still struggling to recover, how can we afford to impede business and job growth? How can we afford to vote yes to the penny?

A former CEO, Joe E. Taylor, Jr. served as S.C. Secretary of Commerce from 2006-2011.