Tax plan spending limits: School districts, local governments undermine new law

When the General Assembly passed property tax relief, and the governor signed it, most taxpayers thought they would get to keep more of their money.

Already, they are being proved wrong. In the wake of the property tax plan, local governments and school districts scrambled to raise taxes, quite simply because they are afraid it will be harder to do it down the road.

Unless constitutional spending limits are placed on local government, homeowners will end up paying more in the end, and business owners will also be unfairly taxed.

In theory, it should be harder for taxes to go up. The plan was supposed to be a win for taxpayers. Homeowners were to get relief in the form of a lower property tax bill, and restraints were put on local governments' ability to raise new taxes because they were being reimbursed for the tax cut through a one-cent increase in the state sales tax.

Unfortunately, over the years South Carolina property owners have seen their tax relief eaten up by rising millage rates at the local levels.

In fact, since statewide property tax relief was passed in 1995, residents in 44 out of 46 counties have seen their total millage increase from hikes by counties, cities and school districts. Of those districts with a local option sales tax, all but one have increased millage. That means statewide property relief has been chipped away, and many South Carolinians are paying a higher sales tax on top of it.

Furthermore, fees and other non-tax revenue have gone up by almost 10 percent every year over the past decade. Taxpayers are becoming more and more aware of these incremental increases as the rest of their tax burden continues to rise, and they are working longer and harder to support an ever-growing government.

It is alarming that government spending is growing much faster than taxpayers' income. Over the 10-year period from 1992-2002, real per-capita income in South Carolina increased by an average of 2.5 percent each year. During that same time frame, state spending increased by 3.4 percent a year, and combined local expenditure growth averaged 3.0 percent. Furthermore, that 3 percent number suggests a smaller growth rate than actually occurred at the local level because state government is also sending billions of dollars to local governments to fund programs.

Government spending is rising, even with the tax relief offered to homeowners. Almost 20 school districts in the state have already moved to raise millage to ensure a higher level of reimbursement from the state next year when the tax relief plan kicks in. County and city governments are following down that same path. That is why tax swap plans that do not include strict constitutional spending limitations on government simply will not work but will ultimately cost taxpayers more money.

It is also true that businesses in our state are being unfairly hit by the unchecked growth of local government spending. Companies are right to express concern that they will be hit the hardest if government continues to grow. Small businesses not only end up paying higher taxes, they will have lower profits. Consumers have less to spend in the goods and services economy when they spend more funding government.

Larger companies end up with a higher sales tax burden and no corresponding property tax relief as well as higher fees that often target them. South Carolina businesses simply cannot afford to raise income levels of their employees, create new jobs and expand their companies when their tax burden is rising at levels that are out of control.

The numbers are clear -- local government millage increases, along with higher fees, have eaten away at the statewide property tax relief delivered in 1995 under Gov. David Beasley. The current tax relief has just been passed, and already local governments are scurrying to repeat history and eat up that relief.

Spending limits do not keep government from being able to provide legitimate public service. But those limits would ensure that the cost of government does not rise faster than the public's ability to pay for it. That is what is happening right now.

Constitutional spending limits should be imposed on governments so that they cannot grow greater than the population and income levels of taxpayers, and those spending limits should only be exceeded in the case of an extreme emergency as declared by the governor.

The public should be aware that without those spending limits, they will likely see their tax bills continue to rise faster and faster.

Ed McMullen is president

of the S.C. Policy Council, a nonprofit, nonpartisan public policy research organization

in Columbia. For more

information, go to

www.scpolicycouncil.com.