Posted on Fri, May. 26, 2006

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Officials compromise on property-tax relief

By Zane Wilson

The Sun News

COLUMBIA - Everything except food could cost a penny more starting July 1 under a property-tax relief compromise approved Thursday.

The measure is the result of almost six months of work in both the House and Senate, and those efforts followed months of public hearings across the state where homeowners said they wanted tax relief.

The compromise must be approved by the full House and Senate, which will be presented with it Tuesday. The conference committee of House and Senate members that worked out the agreement was confident that it will be approved by a broad majority in both houses. Gov. Mark Sanford praised the agreement so his signature is not in doubt if the bill passes both houses.

The effect of the tax relief will not be felt equally by everyone, however. People who have homes valued at less than $94,000 will not see much change.

That is because they are already relieved of school operating taxes under a law approved in 1995. The majority of homes in South Carolina are worth less than $94,000.

That is why the panel worked out an additional tax cut that will affect most other homeowners.

The penny in additional sales tax will bring in $582.5 million. Of that, $498.6 million will pay for the school operating taxes. The remainder will provide a minimum of $2.5 million for 10 poor counties, and what is left will be used to cut homeowner taxes for county operating expenses.

In addition, voters could decide to tax themselves in tenths of a penny, up to 1 cent, for additional tax relief that would apply to all property, not just owner-occupied homes.

Although detailed figures are not yet available, preliminary numbers indicate Horry County would lose $45 million in the deal because the penny would raise $64.3 million while $18.9 million is needed to cover the property tax that would be charged for owner-occupied homes. But Horry County currently ships out a large proportion of its sales tax collections to other school districts under the existing school-funding formula.

Also, supporters said, counties such as Horry and others along the coast that raise high amounts of sales taxes because of tourism also have homes suffering from rapid increase in taxes, so those residents will benefit more from the change than people in areas where values are not rising.

"By any comparison, a consumption tax is more equitable than a property tax," said Rep. Jim Merrill, R-Daniel Island. Merrill was a member of the conference committee.

He said one-third of the residents are paying 90 percent of the property taxes, and that isn't equitable. The cut in food tax and county operating taxes will help people who will not get the benefit from the school tax cut, Merrill said.

Brad Dean, president of the Myrtle Beach Area Chamber of Commerce, said he is not sure what to think until he sees some figures.

The chamber was not happy about increasing sales taxes but the agreement does exempt accommodations, something the chamber also sought.

Rep. Bill Cotty, R-Columbia, said people who pushed to have all taxes removed from homes are still unhappy, but they must understand that what they wanted is not possible.

Panel members said the $2.5 million floor for poor counties is a small step toward funding equity for school districts that have very little tax base.

The proposal does not need voter approval. However, the plan includes a 15-percent cap on property assessment increases over a 5-year period, and voters must approve that change.