Tax Relief Done Right

Senators right to focus on breaks for property owners who need it most

South Carolina, it appears, is to be spared the madness of radical property tax relief. The Senate Finance tax-relief subcommittee lost no time earlier this month in rejecting the pernicious S.C. House-passed plan to wipe out residential property taxes and replace that revenue with a large sales tax increase.

Instead, committee senators are developing a relief plan for folks at risk of losing their homes to galloping property valuations. Their plan, which would cost $100 million, would require the state to refund property-tax payments that exceed 2 percent of a given homeowner's income.

As well, the senators would exempt the first $200,000 of assessed valuation from property taxation for all homeowners - doubling the current exemption. That would provide S.C. homeowners $200 million in tax relief statewide, proportional to their property valuations.

As is the case now, owners of high-valuation property would pay higher tax bills than owners of less valuable homes. To pay for all this, the senators would raise the state sales tax a half point to 5.5 percent.

Though imperfect, this plan makes a certain amount sense, as it would target tax relief to the poster children of the 2005-06 S.C. tax revolt: lower-income S.C. homeowners caught up in real-estate booms. The uniform and equal taxation provision of the S.C. Constitution works to the disadvantage of these good folks.

Folks who live in modest Waccamaw Neck homes, for example, or those who live in the Avenues neighborhoods in Myrtle Beach have stood by in horror as incoming buyers bid up the values of their homes, in some cases by hundreds of thousands of dollars. When market prices rise, so do property valuations.

When the 2004 statewide property re-valuation took effect last year, residents of popular neighborhoods received tax bills that were much higher than previous bills based on their 1999 valuations. Residents on fixed incomes or who hold down low-pay jobs were hard-pressed to meet their increased obligation to city and county governments, and to local school districts.

These same folks would have gotten even more tax relief under the House tax plan. But the House's scattergun approach, which would have left S.C. property owners responsible only for local government bond payments, also would have targeted relief to people who can easily afford the higher property taxes that result from higher market prices and the resultant high valuations.

And even though the House plan would remove groceries from sales taxation, it also would raise the sales tax to 7 cents - among the highest state sales tax rates in the nation. The plan shaping up in the Senate, in contrast, would raise the sales tax a half-cent to finance the $300 million property tax buydown. Groceries would remain subject to the sales tax.

The Senate plan would push more of the total tax burden onto the shoulders of low-income working folks who don't own their own homes. But at least the added tax bite would be small. And working folks who do own their own homes would get offsetting property tax breaks.

That's the problem with tax relief, as subcommittee senators have learned the past few weeks. You can't help any part of the population, even just a little bit, without raising taxes on someone else. But if there must be property-tax relief this year, and politically speaking, there apparently must, the senators have hit upon the right way to do it.

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