Posted on Sun, Dec. 31, 2006

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Higher sales tax, lower property taxes

Lawmakers entered 2006 promising to deliver property tax reform, and the year will end with residents, businesses and others arguing how successful the General Assembly was.

The $700 million plan, approved in June, more than doubles homeowner tax relief — stripping school operating costs from owner-occupied homes. Those bills will be paid by raising the state sales tax to 6 percent from 5 percent on June 1.

A second piece of the plan, approved by voters in November, limits how quickly a home’s tax value can increase. The cap benefits those in hot real estate markets or those who plan on owning their home long-term.

Business have complained that the plan shifts costs to them and customers, and school districts are worried caps on spending may eventually cripple their ability to teach the basics, because they are used to relying heavily on property taxes. Some advocates were disappointed the plan does not remove all taxes on homes.

Lawmakers plan to tweak the measure to make it more fair to businesses.