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S.C.
Statehouse Report
Sunday, Oct. 2, 2005
VIEW: http://www.statehousereport.com/columns/05.1002.taxes.htm
 COMMENTARY
Getting rid of
property tax would be dumb
By
Andy Brack
SC Statehouse Report
OCT. 2, 2005 - - With all of the hype, crying and moaning
about high property taxes, taxpayers need to face two stark
realities:
- Getting rid of the property tax would be a hugely dumb
move.
- Regardless of what solicitous politicians say, the state
just won't completely get rid of the property tax, unless
they're willing for South Carolina to have the highest sales
tax rate in the nation.
College of Charleston public policy analyst Andy Felts likens
the tax structure to a square meal of meat, potatoes and green
beans. If you get rid of the green beans (property taxes)
and add more potatoes (sales taxes), the meal is less balanced.
But what happens if there is a potato famine (recession)?
People buy less stuff, which means there will be less revenue
generated from sales, which means there will be less available
to fund necessary services.
Granted, many would say government needs to do less. But
which services do people want to cut? Prisons? Roads? Schools?
Colleges? Law enforcement? The rhetoric about taxes is similar
to one about Congress. Polls say people hate Congress, but
they love their local congressman. Similarly, they say they
hate taxes, but then they want the services provided by taxes.
Taxpayers should develop a deeper understanding of the tax
system before succumbing to knee-jerk reactions about property
taxes. Consider:
Note
the line where you can see the property tax rebate you
get from the state |
Property taxes will remain. One of the most likely
scenarios is state lawmakers will call for an extra two cents
or three cents of sales taxes to fund school operating budgets,
which currently are mostly paid by local property taxes. If
they raise sales taxes, they likely will shift the new revenue
into an existing fund to offset what local property taxes
now pay for. This isn't altogether new. In 2004-05, the state
paid $249 million in property tax relief to local governments
through the Tax Relief Trust Fund. (Look at your property
tax bill and you'll see the "break" you got from
the state on property taxes.) But even if lawmakers raise
sales taxes, property taxes will remain in place to fund bonds
for schools and local governments, and operating budgets for
local governments.
Huge sales tax increase. If, however, state lawmakers
wanted to completely get rid of all property taxes, the state
would take on the burden of providing some $4.2 billion in
local government funding. That's how much property taxes provide
to keep cities and counties going. To fund that amount for
local government, state lawmakers would have to raise sales
taxes by eight cents - - which would make the state have the
highest, most uncompetitive sales tax in the nation. Bottom
line: this won't happen.
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Weaken tax structure. If the state reduces local property
taxes significantly, it will weaken the overall tax structure
and make it less stable. South Carolina's tax structure is
akin to a three-legged stool that balances property, income
and sales taxes. By removing one of the legs of the stool,
the state's system of raising revenue to pay for services
demanded by taxpayers starts to wobble. Economists prefer
a broad tax structure - - sales, property and income taxes
- - because it is stronger, particularly in economic downturns.
Big brother and home rule. If the state starts acting
as a bigger tax collector, it would foreshadow the end to
home rule because local governments would have less autonomy
to determine how they want to pay for the services their citizens
want. It's an old South Carolina axiom that taxpayers prefer
the government that is the most local. By having the state
interfere with property taxes, local governments would lose
power and give it to the state - - exactly counter to many
conservative arguments about government structure.
Backdoor income tax hike. If the state increases sales
taxes and reduces property taxes, people who itemize deductions
for federal tax purposes will have less to itemize. State
analysts predict that reducing the deduction could lead to
taxpayers having a higher adjusted gross income, which means
they will pay more in federal taxes. So dropping property
taxes could lead to higher federal and state income taxes,
since the state system is built on federal indices.
Instead of listening to the hype, South Carolinians really
need to think about what they're asking for if they want reduced
property taxes because they might get something worse than
they bargained for. Not only should they watch out for the
spin, but they should look out for misinformation, which seems
to have surfaced much more than the truth so far.
RECENT COMMENTARY
McLEMORE'S WORLD
10/2: Hands-on
president
Another great cartoon from Bill McLemore:
To send a message to cartoonist Bill McLemore,
write info@statehousereport.com
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FEEDBACK
9/25:
Bush Administration should snap to
To the editor:
Re: Katrina aid...In addition to contributing via Red Cross
and Salvation Army, don't you think you should encourage your
viewers to lobby the Bush Administration to pull billions
out of the Federal Pot set aside for the reconstruction of
Iraq.
After all, Charity begins at home and Iraq is sitting on
the 2nd largest oil reserve in the world which they could
sell and fund their own reconstruction with the US oversight..Again
CHARITY BEGINS AT HOME...
-- Bob Logan, Little River, SC
Recent
feedback:
- 9/21:
Doesn't
like Red Cross,
Deborah Shealy Nye, Summit, SC
-
-
-
- 9/6:
Rant
on property taxes, Alvin Jones, Easley, SC
- 9/5:
Alternative
energy is realistic,
Tom deTreville, Beaufort, SC
- 9/4:
Way
to serve is to drive slower,
Samuel Tenenbaum, Lexington, SC
- 9/2:
Contrition
follows attack,
Julius L. Brown, Hartsville, S.C.
- 9/1:
Property
tax isn't fair,
Ron McElhannon, Hartsville, SC
- 8/29:
America
is divided,
Warner B. Huck, Hilton Head Island, SC
- 8/28:
Criticizes
Dems,
Calbert W. Johnson, Bishopville,
SC
- 8/28:
Service
learning is growing,
Prof. David Bossman, Seton
Hall University and part-time Charleston resident
More
FEEDBACK
KEEPING TRACK
Ahead
on Sanford's leadership
This section tracks past forecasts by Statehouse Report
with other media reports:
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In Statehouse Report:
9/18, Governor
needs to be a leader: "Gov. Mark Sanford is,
if anything, a libertarian enigma. On the surface, he
seems to be the penultimate foot soldier for the Grover
Norquist notion of making government so small that it
can be drowned in a bathtub....Governor Sanford, your
bumper stickers said you'd provide leadership. Where
is it?"
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In The State:
9/30, Hutto:
It's past time for the governor to lead: "Gov.
Sanford, if you want to ride for fitness or recreation,
that’s fine. But many in our state believe that
it’s time to get off the bike and do the work the
voters of this state elected you to do. We all remember
that word you used throughout your campaign for governor:
“leadership.” Apparently it was no more than
a slogan. But as people continue to seek jobs and lament
the next visit to the gas pump, they are all thinking
that it’s time for leadership, and it’s way
past time for results."
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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
Williams. Hats off to South Carolina native Karen
Williams of Orangeburg, a federal appeals court judge whose
name is being mentioned for a slot on the U.S. Supreme Court.
Coastal Caucus. A new Coastal Caucus is forming this
week. Maybe lawmakers will finally do something to protect
isolated wetlands.
Thumbs
down
Sanford. The governor's been off message of late:
His top administrator resigned this week after being charged
with public drunkenness; his communications director announced
his pending resignation; and his former spokesman pleaded
guilty to a domestic violence charge.
SC GOP congressmen. Some $42,000 in campaign funds
from indicted U.S. Rep. Tom DeLay's PAC has shown up in the
coffers of S.C. congressmen over the years: Joe Wilson, $15,000;
Gresham Barrett $10,000; Jim DeMint, $7,000; Henry Brown,
$5,000; and Lindsey Graham, $5,000. They should return the
tainted money.
Brown. U.S. Rep. Henry Brown voted to weaken the Endangered
Species Act this week. First he burns a national forest; now
he takes a whack at an national symbol. Shame, shame, shame.
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brack@statehousereport.com
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