Tax swap may aid schools

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The discussions come as a landmark school equity trial begins its third week in Manning, a bench trial that could force the General Assembly to re-evaluate a school funding system that relies heavily upon local property taxes, which vary widely from urban to rural regions of the state.

The plan on balance does not produce any new money. In fact, estimates indicate the new sales taxes would raise about $100 million less for schools than current property taxes.

But its appeal, sponsors say, is that it moves the burden of school funding from local property taxes to state sales taxes.

The plan would generate an approximately $1 billion more sales taxes from a two-cent increase, statewide, from the current five cents on the dollar. It also would remove various tax exemptions, which would raise an extra $400 million.

In poor, rural counties with little or no industry, a crushing burden of property taxes would be lifted. Industry-rich Greenville County, which has a high tax-paying ability under the state's Education Finance Act, would get more state money than it currently receives.

Per-student funding would become more dependent upon specific needs of the child, said House Majority Leader Rick Quinn, a co-sponsor of the bill.

"Michigan had pretty good success with this plan. It's more fair. If you look at our history, we've pretty much had a Band-Aid approach. This is not just a reform of the education system; we're trying to reform our tax policy," Quinn said.

A healthy English-speaking child would receive the same per-pupil funding across the state, while a handicapped child would get more, but the amount would also be the same statewide. The current Education Finance Act has a complex system of adjusting funding according to a district's ability to pay.

House Speaker David Wilkins, R-Greenville, said it's too early to tell how much support Quinn will garner for his plan.

"Rick Quinn has done an enormous amount of work on this. He's to be commended for exploring all possibilities to overhaul our tax structure and not be too dependent upon property taxes," Wilkins said.

"I don't have a position. We'll continue to work on it," he said.

Wilkins said the debate over school funding would be necessary whether or not the school equity trial was in progress.

Three decades ago, Republican Gov. James Edwards pushed through the Education Finance Act to equalize funding between urban and rural districts.

But the EFA has only been fully funded according to the formula established in the law six of the 26 years since it was passed.

Other former governors also tried to fix school funding, but their failure is evident in a Manning courtroom where the state is defending the way it distributes education funds.

Despite that suit, Legislative leaders are moving to equalize school resources. Quinn's plan would set per-pupil funding statewide based on students' needs.

The school tax overhaul would be a radical shift in the way the state funds education. And it may or may not satisfy Circuit Judge Thomas Cooper, who is hearing the school equity lawsuit.

Many of the school districts suing the state already receive more money per child than so-called rich districts such as Greenville. Nevertheless, they are arguing in court that it isn't enough to compensate for the socioeconomic disadvantages of the children in their districts.

State Rep. Kenneth Kennedy, D-Greeleyville, said he's cautious about signing on to the plan until he sees the details.

"It is interesting," said Kennedy, who represents industry-starved Williamsburg County, where one mill of school property taxes produces just $45,000 a year. In contrast, one mill in Greenville County produces more than $1 million.

"People have talked about funding education in the state of South Carolina all of my life, and it has never happened the way it should happen," Kennedy said.

"I don't want another mirage put up before me. I'm not going to be part of another farce being played upon South Carolina. I would not advise the poor school districts to drop their lawsuit yet, not at all," Kennedy said.

Representatives from the poor school districts that line Interstate 95 remain skeptical.

"Williamsburg County has never received the type of funding they need, never. They have been playing games with these poor counties for too many years," Kennedy said.

And he said he's not necessarily opposed to greater state involvement in school practices, a concern raised by some urban county legislators.

State Sen. Verne Smith, R-Greer, said some Greenville education leaders have expressed fears that with more state money would come more state control.

"They are talking about fixing it so that local government could not raise property taxes if they needed to. The talk I've heard suggests that if everything is coming from the state, all the rules will be made from the state," Smith said.

Smith said he's certain the control issues will generate some opposition to the plan.

The tax overhaul likely will spawn bitter opposition from business sectors affected by it.

For example, Quinn said he and co-sponsor Rep. Vincent Sheheen, D-Camden, will propose increasing the maximum sales tax on auto sales to $800 from the current $300. The current $300 cap means a person buying a $6,000 used car pays the same tax as a person buying a new $50,000 luxury car.

That move would be expected to raise an additional $65 million.

Quinn proposes eliminating exemptions for telephone, electricity and gas services, which could increase sales tax revenue by $270 million.

This year Senate proposals to increase the sales tax on cars failed. It was opposed by auto dealers and anti-tax groups

A two-cent increase in the statewide sales tax would generate $1.1 billion to replace property taxes for schools.

Quinn said some businesses have won special tax treatment.

"We really should lower taxes on all business. I think that's a solution for a better economy," Quinn said.