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S.C.
Statehouse Report
Sunday, Aug. 21, 2005
VIEW: http://www.statehousereport.com/columns/05.0821.prop.htm
 COMMENTARY
Irony of success
driving property tax debate
By
Andy Brack
SC Statehouse Report
 AUG.
21, 2005 - - Talk about irony: the very folks who have benefited
from South Carolina's surging real estate market seem to be
the ones griping most about property taxes.
Earth to taxpayers: That's how property investment and the
market are supposed to work! If your property increases in
value, you have an asset worth a lot more, which means you
pay more taxes. And because everybody in a county pays essentially
the same rate, the system is inherently fair.
In other words, paying more in property taxes is an indicator
that you're worth a whole lot more. So why all the moaning?
As an investor, you're succeeding.
But most people don't look at things like that. Instead when
they open their assessment or tax bill and see a whopping
increase, they react emotionally. They look at the bottom
line - - the amount due instead of the bigger, long-term picture
that their asset is increasing in value.
"It's a psychological response," said University
of Tennessee economist William Fox. "It's not a rational,
thought-out response that I'm better off because my asset
is better off."
While taxpayers across the state are balking at property
taxes and trying to get them changed, economists like Fox
see property taxes as relatively fair. While somewhat regressive,
property taxes are based on the principle that rates are standardized
and property is valued realistically. Because everyone is
operating from the same baseline, the tax is distributed fairly.
Over the long run, property taxes tend to be less volatile
than sales or income taxes because the latter two respond
more to economic fluctuations. If the economy is souring,
people buy less stuff, which means they pay less in sales
taxes. Similarly in bad times, rises in income drop off, which
generates less income tax revenue.
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But property, as many in real estate say, is a good investment.
It keeps its value.
Over the summer, state lawmakers have been holding hearings
on property taxes to find out what they should do about higher
bills, particularly in coastal and tourism areas where land
values have increased more than normal. Predictably, few people
are shouting to keep property taxes. Instead they want an
alternative, such as an increase in sales tax by 2 percent
to replace most property tax revenues.
But economists warn that putting more of the burden on sales
taxes could destabilize the state budget. Additionally it
could have three major effects:
- Business disincentive. Higher sales taxes could
steer business relocation and development away from South
Carolina. If a business buys a lot of goods, for example,
it immediately would face higher costs here. A state with
lower sales tax rates would be more attractive than South
Carolina.
- Hurt S.C. merchants. Consumers would start shopping
around more. Instead of buying from South Carolina merchants,
they'd head toward the Internet or go to other states where
taxes are lower. In turn, the state would lose sales tax
revenues.
- Shift burden. If those who are complaining the
most about property taxes get relief, somebody else will
have to make up for lost revenues. It's generally accepted
that such a move would shift the tax burden from higher-income
people to those in the middle and bottom end of the income
scale.
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PROPERTY
TAX HEARINGS
The
state Senate is conducting five August public hearings
on property taxes. Remaining hearings are planned for:
Aug.
23, 6 p.m. -- Strom Thurmond High School, Edgefield,
S.C.
Aug.
24, 6 p.m. -- Greenville Technical College, J. Verne
Smith Technical Resource Center, Greenville, S.C.
Aug.
30, 6 p.m. -- Joyner Auditorium, Marion, S.C.
Aug.
31, 6 p.m. -- USC-Lancaster, Bundy Auditorium, Lancaster,
S.C.
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One way or another, it's highly likely the General Assembly
will try to control property taxes on a statewide basis because
too many squeaky wheels are clamoring. Instead of creating
a higher sales tax rate, two options might cause less volatility
for the state:
- Tax modernization. The state could do away with
some or all of the $1 billion in sales tax exemptions it
provides. This could allow the state to generate more revenue,
which could offset reductions in property taxes.
- Property tax cap. A Charleston County 15 percent
property tax cap got thrown out of the state Supreme Court
last year because it treated residential property differently
than commercial and agricultural property. But if state
lawmakers were to send a constitutional amendment to voters
to cap property tax assessments annually at a reasonable
percentage increase, there would be some relief for people
who have seen huge fluctuations in their bills.
Gov. Mark Sanford has warned that the legislature should
be careful about fiddling with property taxes without considering
long-term implications on the majority of what they fund:
education.
He's right. Instead of getting caught up in a public frenzy,
lawmakers should take a measured approach on property taxes.
RECENT COMMENTARY
McLEMORE'S WORLD
8/21: Moonwalking
Another great cartoon from Bill McLemore:
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FEEDBACK
8/17: Market-based Medicaid approach
is hocus-pocus
To the editor:
Why do we let these
folks try to sell this Medicaid waiver on the basis that it
is a "market-based" approach? (See Statehouse
Report, 8/14) There is NO MARKET for Medicaid patients.
Selling this on the basis of a marketplace approach is reminiscent
of the old story about the businessman who realized it cost
him 10 cents more to make each WONKIE than he was charging
but said not to worry because he'd make it up on volume. That
Governor Sanford has other priorities for the use of state
funds is understandable -- debatable, but at least understandable.
That he is such a poor businessman that he would try to sell
this in the private marketplace is simply not believable.
The largest Medicaid expenditures are for elderly and disabled
individuals in nursing homes. We have traditionally had very
low reimbursement rates for nursing homes and have reduced
those already low rates to the point that it is extremely
difficult to find a Medicaid bed (we pay nursing homes about
half of what a decent motel room would cost). Who is going
to compete for these Medicaid patients?
The Medicaid expansion for pregnant women and infants was
started because Governor Riley recognized that too many families
couldn't afford prenatal and well-child care and that was
contributing to our state's dismal infant mortality rates.
Do we really want to start dumping these costs back on low-income
families who don't have the resources so we have to pay more
for neonatal intensive care, disabled care, etc.? Where is
the market for these Medicaid patients?
The rest of the Medicaid population is eligible for the program
either because they are poor or disabled or some combination.
Generally, this population requires the highest level of services
and, because of factors frequently beyond their control, is
the least compliant with treatment directives if they are
able to find a healthcare provider. There is a terrible problem
getting providers for this population because reimbursement
rarely covers the cost of providing service, no-show rates
for medical appointments is astronomical, paperwork is overwhelming,
etc.. Where is the market for these Medicaid patients?
If there is any market, it's for a new group of "middlemen"
who will go after some kind of per/head administration fee
that will add to program costs without increasing the provision
of healthcare one whit. No good businessman would propose
this Medicaid waiver. If we were really looking at market
forces, we'd be putting more State dollars into Medicaid and
DHEC health education programs, not less. Where else can you
get $3 for every dollar invested?
-- Laura Morris,
Mount Pleasant, S.C.
Recent feedback:
- 8/1:
Property
taxes are a scourge, Raymond Owens, North Charleton,
S.C.
- 7/29:
Hypocrisy
among morality police,
Name withheld, Summerville, S.C.
- 7/18:
Looking
for math and common sense, Paula Richardson, Britton's
Neck, S.C.
- 7/17:
Lowered
credit rating is red flag, Bob Logan, Little
River, SC
- 7/11:
Lawmakers
should focus on real problems, Donna Crile, Myrtle
Beach, S.C.
- 7/11:
Need
to do more about poverty, Earl Capps, Ladson,
SC
- 7/11:
Charter
school would help on St. Helena Island, Tom
Hatfield, Hilton Head Island, SC
- 7/10:
Grant
program addresses Pee Dee poverty, Tammy Pawloski,
Professor of Education, Francis Marion University, Florence,
SC
- 7/9:
Regional
approach on prosperity, Laura Morris, Mount
Pleasant, SC
- 7/3:
How
can we let poverty happen, Nancy Kolman, Pawley's Island,
S.C.
- More
FEEDBACK
KEEPING TRACK
Ahead on
Medicaid
This section tracks past forecasts by Statehouse Report
with other media reports:
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In Statehouse Report:
8/14/05: Medicaid
plan looks risky, costly:
"Some may admire the
Sanford administration for trying to do something about
Medicaid, but at this point, the proposal seems like
it has too much of a chance of hurting the poor, elderly
and children. They shouldn't be experimental subjects
to test a Republican political theory...Go back to the
drawing board. "
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In The State:
8/18/05: State
to submit new Medicaid proposal: "South
Carolina will present to the federal government a new
plan to overhaul Medicaid, officials said Wednesday,
after the state’s original proposal met stiff public
resistance."
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SOUTH CAROLINA SCORECARD
Here's a "thumbs up" and "thumbs down" related to various
political events from the past week:
Thumbs
up
Medicaid proposal. It's good news that the Sanford
administration is going to revisit its draconian proposal
to reform Medicaid. We just hope the revision doesn't turn
out worse than the original.
Hodges. Hats off to Kenneth Hodges for being elected
to fill the state House seat of the late Walter Lloyd of Walterboro.
A GOP runoff between Bruce Bannister and William Herlong is
scheduled for the vacant seat of former House Speaker David
Wilkins.
Thumbs
down
Southern Strategy Group. It doesn't smell right that
this lobbying firm is promising "unparalleled access"
to decision-makers, especially when you realize one of its
employees is the brother to SC's House Speaker. Company
site.
Gas prices. Something's got to be done. Gas at $2.80
a gallon? Who would have ever thought?
Wilson. You've got to question U.S. Rep. Joe Wilson's
judgment for bringing in embattled U.S. Rep. Tom DeLay to
SC for a fundraiser.
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