COLUMBIA--A plan to replace some property taxes with an across-the-board sales tax increase was introduced Thursday in the state Senate.
The bill, authored by Sen. David Thomas, R-Greenville, would do away with property taxes on owner-occupied residences and private vehicles. It also would freeze property taxes on businesses. The nearly $1 billion in lost revenue would be replaced by a 2-cent sales tax increase.
The plan's introduction comes two days after Gov. Mark Sanford and the House of Representatives rolled out their proposal for reducing the state's top income tax rate from 7 percent to 4.75 percent from 7 percent to 4.75 percent over the next 10 years.
Critics of Thomas' plan call it regressive and mustered enough support last session to kill it. But the governor's plan, which has wide support in the House and Senate, may provide a vehicle for getting the measure passed this year.
According to co-sponsor Sen. John Kuhn, R-Charleston, Thomas' plan could end up as an amendment to the governor's bill.
"We have been very disappointed that the House has not taken this issue up yet," Kuhn said. "If we have to, we will hold up (the governor's income tax bill) until we get our proposal on it. We are going to have the property tax issue in this state addressed, come hell or high water."
There are a handful of property tax bills floating around the House of Representatives, including plans by House Majority Leader Rick Quinn, R-Columbia, and House Ways and Means Chairman Bobby Harrell, R-Charleston. So far, those plans have been trapped in a legislative quagmire.
Rep. Wallace Scarborough, R-Charleston, said he has been told property taxes are a dead issue in the House this session. He said the House's backing of the governor's plan was an acknowledgement of its inability to pass anything on property taxes.
"We have been unable to get a consensus around any one plan," he said. "So the outlook is not good for us getting something done by the deadline."
Bills must be introduced in the House by April 15. Until the House deals with the state budget, which was voted out of the House Ways and Means Committee on Wednesday, few new issues will be taken up.
Harrell said he does not agree that property tax reform is dead in the House. He said he still plans to introduce his bill, which he thinks has the best chance of passage.
Harrell's plan, in a nutshell, would increase the state's sales tax by a penny, eliminate some exemptions from that levy and generate enough money to end car taxes and limit future home tax increases.
"This issue is far from dead," he said. "Right now, I'm working with people on both sides of the aisle, Republican and Democrat, to get this thing out."
Harrell could not say when that might happen.
The other major property tax bill in the House belongs to Quinn and the former representative and current senator from Camden, Democrat Vince Sheheen. That plan calls for eliminating the school operations portion of property tax bills by increasing the state's sales tax by 2 cents on the dollar and eliminating most sales tax exemptions and raising sales tax caps.
Sen. Arthur Ravenel, R-Charleston, has called property tax reform his top issue of this, his last session.
"Property taxes are killing our people, and something has to be done about them," he said. "I'm going to fight for it."
He's a co-sponsor of Thomas' plan.
Senate President Pro Tem Glenn McConnell, R-Charleston, said there is support in the Senate for both Thomas' plan and Harrell's.
Last year, Thomas visited the Lowcountry and detailed his proposal. Shortly afterward, the Dorchester County Taxpayers Association, a citizens watchdog group formed in 1997, came out loudly against it.
In a packet put out by the group titled "The Flim Flam Sales Tax Scam," the group took issue with the plan on several points, saying:
-- The plan would add to the misery of those subsisting on low wages and fixed income. They would be forced to carry an increased tax burden that many could not afford.
-- Sales taxes, unlike property taxes, cannot be deducted from state and federal income tax returns.
-- Studies by the General Accounting Office, the Internal Revenue Service and South Carolina agree that the sales tax is the most unpredictable revenue source.
The state Board of Economic Advisors signed off on the feasibility of Thomas' plan last year. While Thomas agrees sales tax revenues are not guaranteed year to year, he said history has shown they tend to increase every year.
Since sales taxes are spread over a wider group of people, including tourists and those who don't own property, Thomas said his plan is fair.
