Senate OKs tax plan

Proposal sets up negotiations with House to reach compromise

From Staff Reports

After weeks of back-and-forth debate, the S.C. Senate late Thursday stopped talking about changing the state property tax system and gave key approval to a slimmed-down tax-swap plan.

A limited statewide cut in county property taxes and a local voter-driven option for greater change are the key components of the plan.

The statewide break, which does not apply to school taxes, would be paid for with a half-cent on the dollar increase in the state sales tax. Voters — on a county-by-county basis — could decide to do more.

The breakthrough came after days of often monotonous debate, and one close vote after another on a range of plans. It essentially kicks most of the decision-making for breaks to locals and skirts the sticky issue of school funding by avoiding cuts to those property taxes.

Sen. Chip Campsen, R-Charleston, who sponsored the successful amendment, said the plan gives taxpayers “something instead of nothing.”

“Today, I saw the train wreck coming,” he said. “This gives people a right to vote on property tax relief.”

The approach, which passed 32 to 12, faces third reading — and possibly further challenges — next week. But the likely path forged Thursday sets up a tussle between House and Senate leaders to reach some sort of compromise.

The Senate measure might require a constitutional amendment to become law. That’s because local option sales taxes must currently be used to offset taxes across the board. The Senate change directs relief to home property taxes first.

“In order to make this local option work, you’re going to have to go to the constitution,” said Senate President Pro Tem Glenn McConnell, R-Charleston.

The Senate plan was agreed to in the form of an amendment to a House-passed bill and is far less than what representatives agreed to in March. That plan removed school operations property taxes, which account for the larger share on bills, from all owner-occupied homes and was paid for with an increase of two percentage points in the state sales tax.

Here’s how taxes would change under the Senate plan:

• State sales tax would increase a half-cent on the dollar, except on groceries and accommodations. This would generate about $300 million.

• About $185 million would be applied to the county operating portion of homeowner tax bills, about 30 percent to 45 percent of most bills. Homes assessed at up to about $100,000 would be fully exempted from county taxes, covering about three-quarters of all homes in the state. Owners of higher-value homes would get the base break but pay on the value above $100,000.

• About $115 million of the money would be used to reduce the tax rate for manufacturers and on business property, such as fax machines and computers. The rate would be reduced to 9.5 percent from 10.5 percent.

The bill also allows voters in each county to raise their sales tax rates to cover as much property tax in the county as they wish. Locally, Kershaw, Lexington and Richland counties would have to raise their sales tax between 1 and 2.3 cents on the dollar to eliminate taxes on owner-occupied homes.

“This amendment will help across the board,” said Sen. Joel Lourie, D-Richland. “It will give the counties an option to do something if they choose.”

Staff writers Roddie Burris and John O’Connor contributed.