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Tax cap in voters' hands

Effect would vary based on property

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South Carolina voters will have a chance to cap how quickly their homes' tax value grows when they head to the polls Tuesday, a proposal that could spell relief to Beaufort County homeowners who saw their property values skyrocket during the last reassessment.

The cap, however, would come at a cost. Economists caution the cap probably will raise the tax bills of most of the state's home-owners, businesses and car owners.

The ballot question asks voters whether the constitution should be amended to limit the maximum increase in a home's tax value -- known as the assessment -- to 15 percent over five years.

The measure is the final piece of a statewide property-tax reform plan signed into law earlier this year. The cap is the only portion that needs voter approval because it requires a change to the state constitution.

The three-part plan would:

• Raise the state sales tax to

6 percent from 5 percent in June 2007.

• Use the money raised to pay the portion of property taxes for school operations on owner-occupied homes, about 50 percent of most tax bills.

• Cap assessment increases at

15 percent over five years.

Supporters say capping home values would provide relief to long-term property owners and people on fixed incomes who might not be able to keep up with their tax bills because their homes are becoming more valuable.

"Just because someone's property has appreciated faster than someone else's doesn't mean their income has," said Rep. Bill Herbkersman, R-Bluffton, who backs the amendment.

In Beaufort County, some homeowners' experienced sticker shock when they opened their property-

tax bills following the 2004 reassessment. The huge jumps in value increased taxes on some county properties by as much as 800 percent following the reassessment.

"I don't believe in the formula that just because you have wealth in property that you ought to be taxed higher than somebody else," said Sen. Scott Richardson, R-Hilton Head Island, who also supports the amendment.

But a 2004 Strom Thurmond Institute study looking specifically at how a 15 percent cap would affect Beaufort County concluded that limiting assessments shifts the tax burden to people with lower-valued homes.

"The higher rollback millage after capped reassessment means that many property owners will see a higher tax bill than they would have after conventional reassessment," the study states.

Here's why: Last year, for example, Beaufort County approved an $89 million budget. Many Beaufort County home values jumped during the 2004 reassessment. Some homes in North Forest Beach, for example, saw their values more than double.

Therefore, a hypothetical $500,000 house in North Forest Beach had its tax value increase 100 percent to $1 million. But if the proposed assessment cap had been in place, the value would have increased to $575,000.

Assuming Beaufort County still wanted to collect $89 million in revenue to pay for its budget, the $500,000 difference in tax value between the capped and uncapped home would have to be made up by higher tax rates on all property, including businesses, cars, and homes with slower-growing values.

The Municipal Association of South Carolina has been campaigning against the amendment, saying it's not the deal voters think it is.

Among the association's arguments is that some of the most expensive properties in Beaufort County and other parts of the state are owned by people who live out of state. Howard Duvall, the association's executive director, says that means the cap would benefit nonstate residents at the expense of people who live here.

Supporters of the cap say there are plenty of reasons to vote for it, even if it means higher taxes for some. The cap would provide protection to those who plan to own their homes long-term, especially for retirement if the values of their homes are rising. The cap also would protect homeowners from surging real-estate values if their neighborhood becomes a hot suburb or trendy vacation spot.

To help make sure rising property values don't price someone out of their home, Duvall said lawmakers should consider offering tax credits based on age, income or how long someone's lived in their home.

Supporters also say any tax increase would be offset by the roughly 50 percent cut in property-tax bills for schools that homeowners will begin seeing in a year. Also, a house would be taxed at its full-market value if sold.

The (Columbia) State contributed to this story.
Contact Ginny Skalski at 706-8144 or . To comment on this story please go to islandpacket.com.