FRIDAY'S EDITORIAL

By The T&D Staff

Property tax reduction is priority

THE ISSUE: Reducing S.C. taxes

THE OPINION: Curbing reliance on property taxes is a priority

With the deadline looming Friday to file federal and state income taxes, the state Legislature this week made progress on income tax reform in South Carolina. Gov. Mark Sanford and the House agreed to go along with the Senate on legislation cutting the tax rate for small businesses to 5 percent, action that will cost the state $129 million in revenue over four years of implementation.

The House previously approved Sanford's plan to reduce the state's top personal income tax rate to 4.8 percent from 7 percent during the next decade, agreeing with the governor that resulting economic growth will produce revenue.

The Senate fulfilled its mission of tempering legislative enthusiasm. Two bond-rating agencies have cast doubt on the Sanford plan producing growth to match the $1 billion price tag of the broader tax cut. The state's Triple-A credit rating was at risk.

Data also do not support the concept that income taxes are overburdening South Carolinians. Adjusting for lower incomes, South Carolinians pay less in state income taxes, according to Census Bureau information. The state collected an average $475 for every man, woman and child in 2002, or 1.9 percent of per-capita income. With a U.S. average of 2.1 percent, South Carolina ranked 35th among 43 states with income taxes.

For South Carolinians and many lawmakers on both sides of the political aisle, the bigger issue this April 15 is property taxation. If the governor and the Legislature want to help economic development through assisting individual consumers, shifting the burden from home and property owners is a way to go.

A primary problem is the state's reliance on property taxes to fund education and local government. Couple that with mandatory reassessment every five years and property owners are hit with a double whammy. School boards and local governments raise taxes while the assessed value of the property increases every five years. The end result can be property tax bills that ultimately force people off their land, particularly in coastal areas where land values have gone through the ceiling.

And in underdeveloped areas including Orangeburg County, property tax bills are comparatively higher because there is less big business to share the burden of paying for education and local services. With South Carolina taxing houses and personal property from cars to boats, the average taxpayer is hit hard.

For its part, the Legislature has to date tried to take aim at the volatile reassessment issue. One has only to look at the lines at county courthouses in the wake of reassessments to know that some kind of limitation on resulting tax increases is to be considered.

Sanford this past year vetoed legislation to cap reassessment-based tax increases at 20 percent for homes and businesses. The governor contends the legislation was unconstitutional because it would not tax all property at fair market value.

Lawmakers are ready to try again, this time focusing on preventing people from being driven from their land by delaying major increases until property is sold. That would put the burden on the buyer.

Regardless of the specifics, lawmakers must create the same rules statewide. This week, the state Supreme Court struck down a law letting counties impose a limit on how much property values can increase for tax purposes. Charleston County had tried to put a 15 percent cap on increases after reassessment.

The court did not address whether reassessment caps can be imposed, but ruled that any law governing property taxes had to be imposed evenly across the state.

The reassessment difficulty illustrates the need for a broader look at property tax reliance and reduction. Moves to cut the state income tax will reduce, certainly in the short term, the capacity of the state to help alleviate the burden on the local level.

In a Thursday statement about tax cuts, Sanford promises to continue his push for income tax reduction. "As a fiscal conservative, I believe very simply that giving more of that money back to the taxpayers is critical not only to creating economic growth, but also to slowing the growth of government."

Keeping money in the pockets of citizens by reducing the amount in governments' hands can also be achieved by reducing property taxes that have become THE sore point of taxation for South Carolinians. As a conservative, the governor should lend his support.

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