Good things happen when facts get in way of tax plans

By CINDI ROSS SCOPPE

Associate Editor

LAST WEEK, a Senate tax panel demonstrated what happens when reasonable people come face-to-face with facts that contradict their preconceived notions: They abandon their flawed ideas and go where the actual facts lead them.

It’s too early to tell whether this signals a shift from emotionally driven politics to fact-based reason in the tax reform debate. But, hey, a girl can dream.

The about-face concerned a proposal to roll back the taxable value of property to whatever it was before the most recent reassessment. The House doesn’t have a similar proposal in its tax reform package, but that’s because it wants to eliminate all city, county and school property taxes on homes. And since homeowners are the ones driving this debate, doing that makes a rollback politically unnecessary.

The Senate is wisely steering clear of city and county taxes, and targeting only school taxes. But since that alone won’t mollify the homeowners who hit the roof after their most recent reassessments, senators wanted to roll back assessments before eliminating future reassessments.

The problem with a rollback, tax officials told the Senate reassessment subcommittee on Thursday, is that it shifts taxes, from people whose property values have escalated to those whose values have stayed level or dropped. (Early plans called for prohibiting cities and counties from raising tax rates to keep from losing money as a result of the rollback, but thankfully that idea seems to be losing favor as well; Sen. Larry Martin, the subcommittee chairman, told The Associated Press that would be an unfair attack on local autonomy.)

Bill Gillespie, the state’s chief economist, projected that the rollback would cause people whose property values haven’t grown as fast to pick up the tab for about $106 million in taxes currently paid by people with rapidly escalating property values, moving the tax burden “from the Battery to North Charleston, for example.”

Just as disturbing as the “who” of the shift was the “how many.” When the Pickens County tax assessor estimated that 60 percent of the people in his county would see their tax bills go up if the rollback were implemented, it didn’t take senators long to figure out that 60 percent of their constituents could outvote 40 percent.

Sen. Martin, a Pickens businessman, said he was glad he found that out before proceeding with the bill. “When my auditor and assessor explained to us what would happen, I got a great deal of heartburn,” he said. “We can’t sell that as relief.”

But lawmakers apparently still think they can sell the elimination of future reassessments as tax relief, even though it would create the very same shift.

I hope that’s because the similarities haven’t sunk in yet with legislators — and not because legislators figure they won’t sink in with the public for a while. A rollback would make the shift immediately obvious to everybody, because most people’s tax bills would immediately go up. But moving from regular reassessment to a “point-of-sale” system doesn’t make anybody’s taxes go up — it just prevents the changes in the tax burden that reflect changes in property value; and over time, it won’t occur to most people that if property were being reassessed every five years, their taxes would not be rising as fast, or might even be dropping.

Another pesky fact about eliminating reassessment is that it could end up costing everybody more.

When then-Rep. Rick Quinn floated the Quinn-Sheheen bill that became the rough outline for this year’s proposals, he said he would be able to “eliminate property tax assessors offices by using a cash value assessment system,” saving $30 million a year.

But Cherokee County Assessor Robert Everett says it would actually cost more to operate a point-of-sale system than the current system, in which counties assign new values to property every five years. Not a lot more, perhaps — he projects spending $300,000 to purchase or reprogram computer systems for his small county and $120,000 more a year in operating costs — but it certainly won’t save money.

Mr. Everett estimates that of the 5,000 properties that changed hands in his county in 2005, only 30 percent to 35 percent were sold in “arms-length” transactions that reflect the actual value of the property. The other 65 percent — foreclosures, corporate sales, inheritances, for example — were transferred at artificially low prices that don’t reflect their market value.

That means either you undertax the property or else someone would still have to determine a market value at which to tax the other 65 percent. “It is not an extreme view,” Mr. Everett told me in an e-mail, “to postulate the need to reappraise the entire jurisdiction annually in order to be prepared to assign values to the unqualified transfers.”

None of these problems with the proposed changes will — or should — make a difference to people who believe it is wrong to tax people based on the current value of their property.

But all of the problems should make a great deal of difference to people who are pushing the changes simply because they believe they will benefit those who need help the most — that very small number of people who are in danger of losing their homes because they can’t afford to pay the escalating property taxes.

Eliminating reassessment might save some of those folks, but it won’t save them all. And it will result in a lot of people who are perfectly able to afford their taxes getting a windfall, while most people pay more — whether they can afford to or not.

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571.

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