S.C. legislators have been toying this fall with all manner of
ideas for appeasing South Carolinians who are incensed that rising
home market values have driven up their property-tax bills. Most of
the legislative schemes that have emerged from these discussions
involve lowering property-tax rates and generating alternative
revenue by raising the S.C. sales tax rate 2 percent, thereby
shifting more of the local-state tax burden to folks with low
incomes while giving high earners an undeserved tax break, among
other negative consequences.
One tax-reform idea that emerged from an S.C. Senate study
committee this week, however, has public policy merit: Exempt food
from the S.C. sales tax. Some legislators, at least, show awareness
that the current S.C. taxation system reaches too deeply into the
wallets of the poor.
But there is a catch. The sales tax rate also would be raised 2
percent to 7 cents per dollar. Legislators would force down
residential property-tax rates and ask voters to approve a
constitutional amendment that freezes tax appraisals until homes are
sold.
The Senate committee's plan also would allow counties and
municipalities to increase spending only when personal income growth
increases in accordance with a statewide index. The rules for
business property taxes, meanwhile, would remain the same (in
keeping with the unwise S.C. tradition of treating business as a
government cash cow).
Except for the food-exemption part, this plan is so bad that it's
a little scary senators are even discussing it. For openers,
sales-tax collections tend to be volatile in times of economic
downturn. Much as some S.C. residents hate the property tax, it is
the most reliable tax source year in and year out. That means a lot
when it comes to paying police officers, firefighters, teachers,
public works employees and others who provide the government
services we take for granted. To reduce local property-tax
flexibility is to diminish local control while increasing
legislative power to meddle in local affairs.
Equally important, raising the sales tax - even if food sales are
exempt - would be bad for Horry County tourism. In a state that
depends so heavily on tourists for tax revenue and job growth,
legislators should look with extreme skepticism at any measure that
discourages retail spending by vacationers.
If it's really that urgent to appease squeaky-wheel property
owners, then a Florida-style constitutional amendment freezing tax
appraisals until homes are sold - already a part of the Senate
committee's thinking - is the best way to accomplish that. And if
legislators are really serious about tax justice for low-income
residents, they could exempt food from the sales tax without
coupling that to property-tax relief or a sales tax increase.
Doing these things and nothing else would leave local control
undiminished, avoid tax-burden shifts and keep legislative power
over local affairs in check. The effects of such tinkering would be
relatively easy to anticipate and control. Radical surgery on the
S.C. tax system, however, would create all manner of unintended
consequences that would take years for legislators to untangle.
