State lawmakers don't return to Columbia until January, but the industry already has begun examining one bill that would increase the state's sales tax from 5 percent to 7 percent.
The School Equity and Property Tax Relief Act, as the bill is being called by its 26 sponsors, was introduced in the House in the waning days of this year's session and aims to fund school operations using statewide sales tax revenues instead of local property tax revenues.
According to bill sponsors, residents and businesses over time would see the portion of property taxes earmarked for school operations eliminated.
The property tax revenues mostly would be replaced by money generated by the proposed two percentage point hike in the statewide sales tax.
It is the sales tax increase that the hospitality industry is looking at closely.
Although the sales tax hike would not apply to hotel room charges -- along with groceries and a long list of other exempted products -- it would apply to many services and goods hotels sell or use, including food, amenities and newspapers. Restaurants also would be hit with the increase.
The question for the hospitality industry is how much, if at all, the proposed sales tax hike would keep customers away.
One concern, said Tom Sponseller, president of the Hospitality Association of South Carolina, is that the sales tax increase would make hotels in the state more expensive to stay in than competing out-of-state hotels.
"If you're in Rock Hill, you don't want to have É higher sales taxes than Charlotte," he said.
Still, Sponseller said, the association has yet to take an official position on the bill.
But the group has been getting feedback.
Myrtle Beach business owners, for instance, are almost uniformly opposed to the bill, Sponseller said. That, he said, is because they think Myrtle Beach already doesn't see an adequate return on the hefty amount of sales tax revenue generated in the area.
Hilton Head Island businesses, meanwhile, are still analyzing the proposal.
"We definitely have concerns, but we want to do the due diligence on how it affects our members," said Chuck Salvo, president of the Hilton Head Area Hospitality Association.
The association e-mailed information about the bill to members about a week ago and is waiting for feedback, said Salvo, director of sales for Sea Pines Co.
One factor local businesses might examine is the net result of substituting increased sales taxes for lower property taxes.
House Majority Leader Rick Quinn, R-Columbia, a bill sponsor, said in an interview this week that the proposal would cut in half the property tax bills of some hotels and restaurants.
Salvo said he would like to see a detailed analysis of the net outcome.
But from what he has seen so far, he said, the proposal seems to be just "trading taxes, really."
STATE TOUR
As the hospitality industry works to formulate a position on the proposal, Quinn and other bill sponsors plan to tour the state in hopes of rallying support for what would be a radical shift in the way schools are funded.
Quinn is planning a visit to Beaufort County in September and said bill sponsors hope to visit with business and education leaders in all South Carolina counties by January.
His goal, he said, is to "come up with a fair way of funding education and in the process of doing that lower the tax burden on South Carolinians."
The bill is gaining attention as a state circuit court in Manning takes up a lawsuit filed by rural school districts challenging the state's education funding system. They want the state to give more money to poorer districts, which have lower tax bases.
Quinn's bill, currently sponsored by 15 Republicans and 11 Democrats, would centralize most school operations funding.
Under current state law, Beaufort County can set property tax rates each year to meet local school operational revenue needs.
The proposal would take away that option, making it illegal for counties or school districts to use property tax revenue to pay for school operations.
Local governments, though, still could use property tax revenue to pay for capital projects. The bill also allows local governments to use property tax revenue to maintain current spending levels if local shares of the statewide sales tax revenue fall short of needs.
But Quinn said he expected such shortfalls only to persist for a few years. That's because bill sponsors project that growing sales tax revenues would eventually cover the difference.
The Beaufort County School District is one of several districts that bill supporters say would not initially get enough money back from the state to cover all operational expenses.
Specifically, the local district budgeted about $125 million in operational expenses for the 2003-2004 fiscal year. Local property tax revenues are expected to cover about $94 million of those expenses, with state and federal money making up most of the difference.
Under the proposal, the district would get a lot more state money -- money that would be distributed to districts using a formula based on population and need.
But, according to current estimates from bill sponsors, the local district still would not get enough state and federal money to cover all expenses. So, Beaufort County could levy property taxes to cover the shortfall.
But the amount of property tax money needed would drop substantially, from about $94 million to $22 million, according to current estimates.
Local school officials did not comment on the bill, saying it was too early to do so.
Even Quinn, the bill sponsor, said the proposal is sure to change as it moves through the legislative process.
"I imagine the bill is going to look very different than it does now," he said.
But the state hospitality association has zeroed in on the bill early because it expects the proposal to get wide support -- support from groups that favor lower property taxes and those that see the state's education funding system as inequitable.
"I personally think this is going to be one of the hottest debated bills of the year," said Sponseller, the hospitality industry president.