How will Aiken County voters respond in 2024 to two separate one-percent sales tax referendums on the same ballot?

by Don Moniak
October 31, 2023

|On October 7, 2023, a letter was sent to more than thirty elected officials across the county—-Aiken and North Augusta City Councils, Aiken County Council, the state legislative delegation, and the School Board—asking seven questions about Aiken County one-percent Capital Project Sales Tax and the Aiken County School District’s one-percent Education Capital Improvement sales tax for school construction projects.

That letter and responses to date can be found in A LETTER TO AIKEN COUNTY’S ELECTED OFFICIALS REGARDING ONE-PERCENT SALES TAXES, a permanent page that will be updated as elected officials provide more responses, either directly or indirectly.

This background article is the first in an intermittent series that will address sales tax issues and the November 2024 referendums. The topics will include past accomplishments, luxury projects vs necessities, the various public debates, and the compilation of projects for the 2024 referendums. Any letters to the editor or other offerings are appreciated.

One-Percent Sales Tax Background

In November of 2024, Aiken County voters will encounter two individual one-percent sales tax referendums on their general election ballot:

1. The Capital Project Sales Tax (CPST)—used to fund capital projects and vehicle and major equipment purchases across the County (1) and its cities and towns.
2. The Aiken County School District Education Capital Improvement sales tax (School tax)—used to to fund new school construction and renovations of existing schools.

These two taxes are already in place, but due to expire. The 2024 general election will be the first time voter referendums on both taxes will be on the same ballot; and the first time since 2004 that a referendum is on a Presidential ballot.

One-Percent, One-Cent, or A Penny?

Both local sales taxes involve extracting revenue from consumers at a rate of one percent of all retail purchases, with the exception of unprepared foods. (2)

Both local sales taxes are incorrectly termed as a “penny tax,” or “one-cent tax,” by many government officials and sales tax advocates; and local media generally swallows and regurgitates these two sound bites without question.

But neither of these is a “penny tax” or “one-cent tax,” both are one-percent sales taxes. The system does not add a penny in taxes to each sale, it adds one cent of tax per dollar spent on retail products.

Purpose of Local One-Percent Sales Taxes.

Both of the proposed sales taxes can only be used for capital projects, school construction projects, new or renovated county facilities, purchase of new equipment and vehicles, paving of dirt roads, and any other qualifying project. The revenues cannot be used to fund everyday, essential government operations, hire new employees, or give pay raises to existing employees.

Advocates prefer this sales tax revenue approach as a means to avoid property tax increases, yet still provide funding for essential government infrastructure. The CPST was described in 2018 by County Council Chairman Gary Bunker as “very crucial for the future of Aiken County,” and in 2014 by County Administrator Clay Killian as “a godsend.”

In 2014, the Aiken County School District was not ashamed to publicize another advantage: that up to a third of the tax revenues derive from out-of-county residents shopping in Aiken County—even though these outsiders derive no benefits from their payments to the Aiken County School District except maybe a new locker room or two for visiting teams.

New Tax or Existing Tax?

In practical terms, the two referendums might be viewed as a renewal of existing CPST and School taxes.

But each of the five sales tax referendums that have been on Aiken County ballots since 2000 was technically a new tax for two reasons.

First, each Capital Project Sales Tax (CPST) and School sales tax contains a completely new and different set of projects for dedicated funding. The CPST referendum, for example, requires a new ordinance that must undergo three County Council readings and a public hearing. Second, each tax has an expiration date.

History of Tax Referendum Results.

The School District’s first one-percent sales tax referendum was approved during the November, 2014 general election by a margin of 23,909 (59 percent) to 16,407 (41 percent).

The 2014 referendum was for a ten-year school construction program, with proceeds specifically dedicated to constructing the new Leavelle McCampbell Middle School in Graniteville, additions at Aiken High and North Augusta High to replace outdated buildings, plus the construction of Ridge Spring-Monetta elementary and high schools.(3)

In the past twenty-three years, four rounds of Aiken County Capital Project Sales Taxes referendums have been placed on county ballots, and three of four times the referendums have been approved by wide margins.

2000: CPST I : 23,895 (52%) to 22,065 (48%) (Originally called LOST, Local Area Sales Tax).
2004: CPST II: 32,460 (59.7%) to 21, 840 (40.3%)
2010: CPST III: 25,235 (55%) to 20,543 (45%) (closer vote than in 2004, was attributed in part to a Tea-Party surge).
2018: CPST IV: 36,727 (65 %) 19,183 (35%).

But 2024 will be the first year that Aiken County voters will be asked to voluntarily tax themselves at a 2 percent rate on all retail goods except unprepared food.

Cumulative Effect of State and Local Sales Taxes

The culmination of the two one-percent sales taxes and the State’s
6 percent sales tax is an 8 percent sales tax in Aiken County for all retail sales except for unprepared foods.

But state law also allows local governments to charge “hospitality” sales taxes on prepared foods, and these sales taxes are also slyly marketed as one-cent or penny taxes. The City of Aiken enacted a one percent hospitality tax in 2015, and the City of North Augusta’s hospitality tax dings diners at a 2 percent rate—a rate that tends to undermine any “penny tax” marketing by tax-hungry officials.

The accumulation of these sales taxes when purchasing a restaurant meal, grocery store or convenience store hot bar food, or even freshly cut fruit, reaches a level of 9-10 percent depending upon the hospitality tax rate. This taxation rate, which is never referred to as a “dime tax,” means people dining out in Aiken and North Augusta involuntarily tithe the government two-thirds as much as the standard fifteen percent voluntary tips to waitresses, waiters, bartenders, and other servers.

What If?

As a result of years of dependency on voter-approved, one-percent sales taxes for capital projects, local government officials tend to take the revenues for granted. Planning is already ongoing to compile a list of projects for the referendum, but the very act of making that list can have the effect of assuming the next referendum will pass and allow both essential and pet pork projects to be funded. For example, at a recent Aiken City Council meeting, city officials informed citizens concerned about the condition of the Smith-Hazel Recreation Center’s gym floor that funding to correct its subpar condition will be in the next CPST.

But whether viewed as a renewal of existing tax or new taxes, under current referendum plans Aiken County voters will be asked for the first time to essentially tax themselves at a 2 percent rate. The fact that the referendums will be on the Presidential election ballot, which attracts considerably more voters, might add more uncertainty to the vote.

What will happen if voters say no to one or both of the referendums, and choose instead to force local governments to adapt to fewer funds? So far, there is little evidence that elected officials or their administrators have considered that possibility.

FOOTNOTES

(1) Aiken County Capital Sales Tax Projects from 2000 to present can be viewed from this county webpage.

(2) These county-wide sales taxes are authorized by South Carolina law, which permits counties and municipalities to choose to either exempt or allow sales taxes to be collected for unprepared food purchases. Unprepared foods are defined as any food product that can be purchased with USDA food stamp program.

Aiken County currently exempts unprepared foods, which is in line with the state sales tax system. Since 2007, the State of South Carolina has exempted unprepared foods from the state-wide sales tax through legislation that also reduced the state rate from seven percent to six percent.

(3) The 2014 APSD sales tax referendum was followed four years later by a bond referendum which passed by a margin of 59 to 41 percent. Unlike the sales tax referendum which was spread across the county, the bond was disproportionately benefitted North Augusta- with $ going to two new schools and two upgraded schools.