S.C. Statehouse Report
Sunday, March 26, 2006
VIEW: http://www.statehousereport.com/columns/06.0326.prop.htm


Property tax debate rounds corner
By Andy Brack
Publisher
SC Statehouse Report

MARCH 26, 2006 - - Hats off to state senators for a responsible, relatively progressive proposal to reshape the way property is taxed in South Carolina. Compared to the fiery, reactionary plan passed in February by the state House, the Senate proposal is a breath of fresh air.

It also is something that realistically could get passed.

At the beginning of the session, it was pretty clear lawmakers would do something to reform property taxes. They’ve been under intense pressure from a variety of citizen groups since last year.

Both chambers studied various proposals. The House ended up taking a slash-and-burn approach to try to get rid of almost all property taxes on owner-occupied homes. How? By raising the sales tax rate by 2 cents to 7 cents statewide. In a nod to making the proposal a little bit progressive, it also called for getting rid of sales taxes on groceries.

PHOTO ESSAY. If you'd like to see a photo essay of the devastation in New Orleans and Mississippi, click here.

But the House proposal has a big problem: By hiking the sales tax by 2 cents, South Carolina would have one of the highest sales taxes in the country. And if that isn’t enough to make the Palmetto State less competitive economically, a significant burden of the tax would fall on businesses. In other words, the House plan would do a lot to help folks with high property tax bills, but it would hurt businesses that buy goods in the state and would tend to discourage investment here.

It’s the policy equivalent of cutting off the state’s economic nose to spite its face.

So in comes the Senate, whose members don’t face grumbling voters in 2006. The Senate Finance Committee over the summer launched a comprehensive review of tax structures and held hearings across the state to listen to folks about property taxes.

Senators seemed to listen a little more deeply than House members, who apparently only heard this message: “Get rid of property taxes.” But senators heard this, “Adjust property taxes so that people aren’t taxed out of their homes.”

Depending on the message, you’re able to come to quite different policy conclusions.

In a plan approved by a special Senate subcommittee that will be discussed in the coming week, the Senate calls for an extra half-cent to be added to the sales tax rate to generate a pool of $300 million to help offset property tax burdens.

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While the Senate offers a somewhat complicated policy proposal, it can be boiled down into two parts:

Some relief for all. Two thirds of the pool of money - - about $200 million - - would be spent to reduce property taxes for every homeowner. It’s not clear how much that would be, but the plan essentially calls for an extra exemption to be allowed to homeowners to reduce the assessed value of a home. In other words, if your home is worth $200,000, you might get an extra $30,000 in an exemption, which means you would be taxed on a value of $170,000 instead of $200,000. For homeowners with modest homes, tax bills could be reduced significantly.

Circuit breaker. The other $100 million would be used to offset property taxes based on homeowner incomes. The most homeowners would pay in property taxes - - after accounting for the relief through the exemption above - - would be 5 percent of their incomes. After that amount, the $100 million pool would subsidize the difference. This component of the proposal is relatively progressive because it works best for people who are cash poor and house rich, such as the person on a fixed income who lives on the coast.

“For a good number of people in South Carolina with the most modest homes, property taxes will just about go away,” said state Sen. Wes Hayes, the Rock Hill Republican who chaired the Senate subcommittee that developed the proposal.

If you’re thinking the Senate proposal might get caught up in partisan bickering on the Senate floor, you might want to think again after listening to what Senate Minority Leader John Land, D-Clarendon, says:

“I think this is a beautiful compromise. Businesses should be supportive of this idea and homeowners should be supportive. I think it is a brilliant proposal.”


lighter side

3/26: Different kinds of cleanup

Another great cartoon from Bill McLemore:


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feedback

3/19: Citadel cadets help storm victims

To the editor:

You [Commentary, 3/19] might be encouraged to know that, among many others who have helped that area, Citadel cadets have made two - soon to be three - Katrina hurricane relief trips to Waveland/Bay St Louis, MS. I've been fortunate to organize those trips and, since I live in McClellanville and went through Hugo here, I know exactly what you mean in trying to help people wrap their minds around the enormity of the destruction from Katrina.

Also, we've been doing hurricane relief missions for three years now (my
students and I) and have learned some practical lessons for such work and for organizing recovery, as have some of the other groups.

-- Karen Shuler, The Citadel School of Business Administration, Charleston, S.C.

Recent feedback:



Ahead on cigarette taxes

A look at how you often learn first about things in SC Statehouse Report:

From Statehouse Report, 1/8/06

"The state's lowest-in-the-country cigarette tax is a missed revenue opportunity that could pay for serious improvements for education, curb smoking and improve the health of South Carolinians. By raising the tax which is painless for three out of four state residents, there would be more than enough money to fund free pre-kindergarten for 4-year-olds across the state."

From The Post and Courier, 3/23/06

"The House Ways and Means Committee should give serious consideration to a proposal to raise the state's cigarette tax - the lowest in the nation - to provide for expanded health care to children and workers who can't afford medical insurance. Increasing the cigarette tax by 32 cents a pack would raise an estimated $112 million in state revenue. "


scorecard

Here's a "thumbs up" and "thumbs down" related to various political news items from the past week:

Thumbs up

Thanks to Dems: South Carolina Democrats may have seized on the most original political ploy in years when two of them – lobbyist Dwight Drake and state Sen. Brad Hutto of Orangeburg paid $6,600 at a fund-raiser to win a dinner for nine couples at the Governor’s Lace House in Columbia. They invited all the gubernatorial candidates of all parties, including, of course, the host governor. They are all coming, along with their wives, as are Hutto and Drake and their wives and others, including a reporter and his wife, who we suppose will be our fly on the wall. And what did the candidate for governor say to the other candidate for governor?

Making up: It may be hard for those outside politics to understand how politicians can be at each other’s throats during a political campaign, but at least courtesy to each other outside of the political realm. For instance, there’s Democrat Inez Tenenbaum, state superintendent, who ran in 2004 against Republican Jim DeMint for US Senate in a bitter, raucous campaign. DeMint won, but this past week, they joined forces to promote the Pell Grant for students in the first time they have seen each other in person. They embraced briefly, then let bygones be bygones in an effort to help a common cause.

Thumbs down

Flagging: Rep. Ken Kennedy, D-Greeleyville, raised many eyebrows in the House when he acerbically responded to Rep. Catherine Ceips, R-Beaufort, that neither he nor his family would be aided by the purchase of three Revolutionary War battle flags and said he had thrown away Ceips’ letter about the flags. Other representatives from both parties disagreed with Kennedy, as did 107 members who voted to direct the Budget and Control Board to enter into negotiations to buy the flags before auction and to raise privately the $2- or $3-million that would be needed to purchase the flags taken by “Bloody” Tarleton of England in a Lancaster County massacre. Kennedy didn’t even bother to vote.


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