Plan to slash property taxes nears approval

Sales tax hike would wipe out two-thirds of homeowners’ bills

By JOHN O’CONNOR

johnoconnor@thestate.com

Lawmakers wrestling for months on changes to the state’s property tax system are near an agreement that would wipe out roughly two-thirds of most homeowners’ bills in exchange for a penny-on-the-dollar increase in the S.C. sales tax.

But final agreement on such a plan faces a hurdle on local control and increased pressure from House leaders who are threatening to hold up work on the $6.7 billion state budget until a deal is officially done.

“It’s kind of like cooking a 1,000-pound turkey,” said Rep. Bill Cotty, R-Richland, the House’s chief negotiator. “Nobody knows, but we’ll tell you when it’s done.”

The working plan would raise the state sales tax and use the more than $500 million generated to pay school operations taxes on owner-occupied homes.

That accounts for about two-thirds of most tax bills.

The break would be added to an existing program that cuts homeowner tax bills by using money from the state general fund.

Negotiators, however, are stuck over whether county residents should be allowed to vote to increase their own property taxes.

The provision is not in either of the two original bills but is being insisted upon by Senate negotiators.

Senators struggled for weeks to get a property tax reform plan passed and finally settled on a complete local option plan that now appears to be off the table.

If negotiations drag on, state lawmakers could be headed to an extended session, leaving the state budget to languish in limbo.

To adjourn by the June 1 deadline, the House and Senate would need to pass the budget Thursday at the latest. That would leave enough time for Gov. Mark Sanford to issue vetoes and the General Assembly to vote to override or sustain those vetoes.

But with House leaders refusing to discuss the budget until the Senate accepts a compromise on statewide property tax relief, and just five legislative days remaining, time is running short.

Cotty and Senate Finance chairman Hugh Leatherman, R-Florence, met Tuesday to discuss a compromise plan that would include a 1-cent-on-the-dollar statewide sales tax increase.

That would pay school taxes for owner-occupied homes — about 60 percent to 70 percent of most tax bills. An additional $100 million raised would be applied to county, or some other, property tax.

The plan skirts controversial proposals to have the state take over school district funding and costs about half as much as a House-passed plan.

Businesses, meanwhile, stand to face higher property taxes. If local districts raise rates, that’s who will pay. And sales taxes will rise to 6 cents on the dollar statewide, and to 7 cents in places like Richland County, where local-option increases to pay for services already are in place.

House Speaker Bobby Harrell, R-Charleston, said the House would introduce legislation to extend the session beyond June 1 and — if necessary — to keep state government working without a budget.

Leatherman has not given in to House pressure, pointing out that federal efforts to tie up the budget have backfired.

House leaders have called him obstinate in negotiations, but Leatherman said the committee is close to finishing its work.

“We’ll be searching for some compromise,” Leatherman said. “We don’t have as far to go on budget conference.”

Key House members don’t want to leave the door open for property tax increases on homeowners. That has led them to oppose a local option that gives voters the opportunity to raise taxes.

Key senators argue for a safety valve. That would give school districts more flexibility in how they pay for programs and make them less dependent on the state for new funding increases.

With primary elections just two weeks after the session ends, many lawmakers are trying to plan their calendars. House leaders said they had no intention of extending the session and delaying votes on vetoes.

But if that were to happen, said Joel Sawyer, Gov. Mark Sanford’s spokesman, it would be “blatant political gamesmanship.”

“If it’s so important to get these done sooner rather than later, why not get them done before the primary?”

Harrell said the House has no desire to drag out the session — or votes.

“We have to prepare to keep government running if we don’t reach an agreement before June 1,” he said.

“There’s no intention to shut government down.”