IT MIGHT appear that Cayce has a decent case for charging a 2 percent sales tax on prepared foods.
The state and local governments are relying more heavily on sales taxes to meet various needs these days, because they tend to be more popular than other taxes. And with federal and state aid to local governments on the decline, a sales tax that local councils can enact with a simple vote is a tempting funding source. Besides, Cayce residents are used to paying the additional tax when they eat out in Richland County; Richland and its municipalities enacted the levy on food prepared in restaurants and grocery delis back in 2003.
But Columbia and Richland County never should have implemented the tax. And Cayce shouldn’t now.
The tax can be used only for tourism-related projects, which doesn’t address local governments’ real needs. It doesn’t make sense to raise a tax to fund tourism-related projects at a time when cities and counties are struggling to find money to pay for fundamental services that are essential to basic living.
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All too often, local governments that approve the 2 percent levy on restaurant food find themselves having to dream up ways to use it. While the money can only be used to lure tourists, the law’s vague language doesn’t adequately define what that means, and many local officials take advantage of that in order to fund wish lists or bolster the general fund indirectly. For example, it seems that every government that has the tax deems it appropriate to use it improve parks, something traditionally funded using property tax dollars and used primarily by residents.
Cayce City Council has agreed to consider the tax as a way to fund a history park, operation of the local museum and upkeep of the path along the Congaree River, among other things. City officials say with federal and state funding once used for such things on the decline, it makes sense to consider the restaurant tax, which could generate a projected $670,000 annually.
If Cayce adopts the tax, it would be the lone local government in Lexington County with the levy. The town of Lexington repealed its tax in 2005, less than two years after enacting it. While the town had collected a wad of cash, it had fewer requests than there was money available, leaving officials to say the remainder would be used when — or if — new ideas arose. In the meantime, more money kept rolling in.
Instead of continuing a tax that could lead to money lying around with no real purpose, the town wisely repealed it. The fact that the money couldn’t be spent for general use only increased the likelihood of it being wasted.
We understand the predicament Cayce and other local governments find themselves in. Yes, federal and state funding is tightening up, and state lawmakers have capped local governments’ ability to raise property taxes, their major source of funding. We have always believed that state lawmakers need to give local governments more options to raise revenue other than a property tax. However, it defeats the purpose when the few alternatives that are available have stipulations that dictate how the revenue can be used.
That leaves local governments scrambling for money wherever they can find it. But imposing a new tax that doesn’t help meet pressing needs is not the answer.
Instead of grabbing for these restrictive dollars, local government leaders should redouble their efforts to convince the Legislature to give them more choices, including expanding the uses of hospitality taxes. And lawmakers ought to oblige them.