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Use caution in tax reform
Legislators should avoid reckless changes in the property tax system. Local services must be funded.

Posted Sunday, August 28, 2005 - 6:00 am


State senators got an earful last week about property taxes, and some of it wasn’t the usual griping they hear from their constituents. In fact, if the senators were paying attention, they learned that property taxes pay for the local services that constituents not only need, but also demand.

To the Senate’s credit, it has formed the Joint Senate Judiciary and Finance Subcommittees on Property Tax Reform, and those joint subcommittees have been conducting hearings this summer throughout the state. Both the Senate and House are considering substantive changes next year to the property tax system, and they should proceed with great caution. If they don’t, they could damage the ability of local governments to pay for police and fire protection, for emergency medical services, for garbage collection and road maintenance, and for local schools.

And if the solution is the one favored by some legislators — a statewide sales tax that replaces the property tax — the cure could end up being worse than the problem. A statewide sales tax could weaken the grip local governments have on their own funding source, and in doing so could put even more power in the hands of state legislators who are far removed from local problems. Taken to the extreme, this solution could have local residents begging state legislators — not their city or county councils — to fund more police officers or buy new fire trucks. Such a change would do to local governments what termites do to a home — quietly and quickly, the foundation would be eaten away.

A problem often cited about property taxes is that in some rapidly growing areas, the tax rises significantly on the homes of people who have modest or fixed incomes. In those cases, the homeowners are paying taxes on paper wealth — money that won’t materialize until they move or die. One solution cited in Greenville and at other hearings is to consider circuit breakers on homeowners of limited means — not the wholesale exemptions for all elderly people, some of whom have greater discretionary income than young families.

Local government leaders also told state senators some of the things they can do to help without eliminating the property tax system: (1) The state could take over a greater share of funding public education. (2) The state could give local governments, especially cities, more ways to raise revenue. (3) The state could give local governments more flexibility with some of the resources they now have, such as the accommodations tax or hospitality tax.

One of the citizens who spoke against reducing property taxes was Ronald Sobczak, who told the Senate panel, “I’m here to tell you that although you have reduced my taxes every way you can, my demand for services from the state has not been reduced.” That’s something for legislators to chew for a few months.