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:

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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

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KEEPING TRACK
Ahead on Sanford's leadership

This section tracks past forecasts by Statehouse Report with other media reports:

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?"

 

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."


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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