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Pay close attention to effort as tax reform takes shape

Changes to property taxes will ripple through the system

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With the sting of last year's property reassessment still fresh, Beaufort County property owners are watching a push to change South Carolina's property tax system.

The first volley was fired Tuesday when a state Senate committee endorsed plans to eliminate some property taxes by raising the state's sales tax from 5 percent to 7 percent. The increase is expected to bring in an additional $1 billion.

The money would be used to eliminate local property taxes for school operations on most homes and cars. But as Beaufort County Council Chairman Weston Newton said Friday at the chamber's annual State of the Community breakfast, "the devil's in the details."

The plan as it stands now also would allow voters to decide in November 2006 whether to change the state constitution to give counties a choice from among four methods of reassessing property values for tax purposes. Options would range from keeping the current system to reassessing homes only when they're sold or substantially added on to.

Among the many things to be sifted and sorted is the impact on local governments and their ability to raise money to pay for the many services they are obligated to provide.

But perhaps most sobering is that it would put the responsibility for paying for local school operations solely in the hands of state lawmakers. For many years, local officials have ground their teeth in exasperation at the Byzantine formulas that allocate state funding for schools. During the last legislative session, they fought hard to maintain funding under the state's Education Finance Act even as lawmakers increased the per student allocation. Beaufort County Council and the Board of Education voted last week to set aside $125,000 each to pay for legal help on the subject.

Our state funding is based in part on our ability to pay (i.e., our property tax base). But that burgeoning tax base also has allowed Beaufort County to set its own course on many education initiatives.

Under the Senate proposal, state lawmakers -- not locally elected people -- would largely control school spending. Is that what we want?

Mayor Tom Peeples suggested a 2 percent sales tax to pay for education in a letter to state lawmakers earlier this year. But Peeples also warned them that they needed to put the money in a lock-box and use it for nothing but schools.

It's easy to understand his attitude. If estimates are accurate, a 2 percent sales tax would raise about $100 million more than is needed to cover current school costs. Sen. Hugh Leatherman, R-Florence, said the excess would be held in case of economic downturns.

That would be reassuring if we hadn't seen state lawmakers repeatedly raid trust funds set up for specific purposes as they struggled to balance the budget in tough economic times.

State lawmakers also -- in a slightly condescending tone -- said they would need to make sure local governments don't take advantage of the drop in property taxes for schools to hike property taxes for local operations.

That brought a fiery response from Peeples at Friday's breakfast. He said the money raised by a tax for education should be protected through a constitutional amendment and state lawmakers should keep their hands off it.

This is a complicated puzzle with a lot of interlocking parts, not the least of which is a lawsuit filed by poor school districts who say the state hasn't done right by them when it comes to school funding. That decision is still to come.

We're increasingly looking to sales taxes at the local level to solve money problems, especially for road projects the state won't pay for.

And lawmakers need to pay attention to what's happening in Washington. U.S. Sen. Jim DeMint has proposed a federal tax reform plan that includes an 8.5 percent sales tax on some purchases.

All lawmakers need to look at this process in a holistic way. Government services at all levels will still need to be paid for. State law allows local sales taxes, but it also requires voter approval. Increase the state sales tax and put in a place a federal tax and what chance do you think a new local sales tax would have?

As Newton said, the devil's in the details.