Property tax relief revived

With no clear plan, Senate takes a break from debate on system overhaul

By JOHN O’CONNOR

johnoconnor@thestate.com

Two weeks of property tax debate provided lots of theater — but few answers — about how the Senate will tackle the legislative session’s highest-profile issue.

There is no plan, no consensus and no time left before the Senate switches gears to the $6.5 billion state budget this week.

But for the first time this session, diverse clusters of senators demonstrated a growing will to revamp the state’s tax system. And key senators say a week off to reorganize might translate into major tax changes for state residents before the General Assembly session ends June 1.

“It gives everybody in the Senate an opportunity to put their best amendments forward ... see if we can arrive at a resolution on the issue,” said Senate President Pro Tem Glenn McConnell, R-Charleston.

Thus far, no single approach won the support of a majority of senators. But divergent plans — including a $2.4 billion overhaul that would put public school funding completely in the state’s lap — attracted support from coastal Republicans in fast-growing areas and education-focused rural Democrats.

The bi-partisan support for such a broad overhaul surprised some Senate leaders, who by the end of the week were predicting tax changes were less a question of if than what.

WEEK OF DEBATE

Property tax relief came to the Senate floor in a form that few senators supported. The lack of a plan to rally around created chaos in the debate, which ended Thursday.

Rather than fine-tune a proposal, lawmakers spent the week trying to cajole — and bully — their favored plans to the forefront of Senate debate.

Some held up pennies to demonstrate their respective plans’ simplicity. Others held up representations of $1 million bills to show how much was at stake for businesses and local governments and schools.

Senators huddled in their lounge or off to the side to work on details.

“We’ve got to adopt a framework, otherwise we’re still out here wandering in the desert,” said Sen. Jim Ritchie, R-Spartanburg.

Plans were tweaked to gain support, but while a sharp property tax cut would draw some votes, too many raised fees to compensate for the lost revenue would lose nearly as many senators.

“We should have declared victory and gone home,” said Sen. Larry Martin, R-Pickens, after the Senate adopted a framework giving county voters the option to decide whether property taxes should be cut in exchange for a higher sales tax.

When debate ended Thursday, die-hard supporters of property tax cuts, such as Sen. Jake Knotts, R-Lexington, vowed to keep at it until something passed.

PATH TO CHANGE

Whether the Senate is more likely to take a small bite out of property taxes — allowing county voters to raise their sales taxes — or go whole hog with a revamping of the system isn’t clear.

Lawmakers are divided on two issues: state funding of schools and the impact on business. Democrats and Republicans have lined up on both sides.

The sizes of the three major proposals reflect the varied desires to tackle those issues:

• Small — Would allow each of the counties to raise its sales tax enough to cover the operating portion of school property taxes. The plan also includes a small statewide sales tax hike that could cover tax relief for homeowners who need it the most and businesses. The plan has support from pro-business lawmakers, as well as coastal supporters desperate for change because of rapidly rising property values and taxes.

• Medium — A 2-cent statewide sales tax increase, which would cover school and county operating costs. Property tax breaks have been added for businesses and manufacturers, which could take hundreds of millions from the state budget. This proposal is closest to the House version. This plan has the most support from populist lawmakers, especially Republicans.

• Large — A plan to completely revamp public education funding, creating a separate pool to pay all school operating taxes on all property. The plan would raise the state sales tax by 2 cents and impose a statewide property tax on everything except owner-occupied homes. Residents still would pay property taxes on cars and second homes but likely less than they do now. This plan is supported by Charleston and Beaufort county Republicans and Democrats, whose districts are concerned about fairness in school funding.

McConnell said a new option might emerge in the next week as well.

While senators make up their minds, House members have been amused by the debate, now that their once-dismissed plan is back in consideration.

House members said they would need to see a final plan, but would be willing to compromise.

“Our best response might be to come up with a third plan,” said Rep. Bill Cotty, R-Richland, the House’s lead sponsor of changing the tax system. When the House and Senate sit down to rectify their differing plans, “It’s best to have as many options on the table as possible,” Cotty said.

Thursday, McConnell was convinced House members would get that chance.

“The signal from the Senate should be a positive signal to the people of South Carolina,” he said. “We’re not involved in a stall.”

Reach O’Connor at (803) 771-8358.