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reprint or license thisBusinesses aim to alter new tax law
School districts, facing revenue caps in 2007, are raising taxes now, hurting businesscommunity
By JOHN O’CONNOR
johnoconnor@thestate.com
S.C. businesses say they are being socked with higher school taxes as a result of the state’s new tax reform law, adding they will work to change the law next year.
At least a dozen of the state’s 85 school districts have voted to raise taxes since the new law’s passage, most about 8-10 percent. Some Midlands districts likely will follow suit.
Some school officials say they are raising taxes this year — rather than spending their savings — because the new law caps their future revenues.
The tax hikes have raised the ire of the state Chamber of Commerce and state Sen. Larry Martin, R-Pickens, who is drafting a bill that would cancel tax increases passed this year. Martin said school districts are engaged in a money grab.
Any new taxes passed this year would be paid only by business and vehicle owners once the new law takes effect.
The tax plan, signed into law in June, takes effect in June 2007. The law would remove school operating taxes from homeowners’ tax bills — typically reducing those bills about 50 percent. In exchange, the state would raise its sales tax to 6 percent from 5 percent.
The law also would limit the ability of school districts and local governments to raise taxes in the future.
School district budgets have grown about 8 percent a year on average over the last decade, according to the state Office of Research and Statistics. The new law would limit that growth to the rate of population growth plus inflation. Last year, that would have totaled slightly more than 5 percent.
BUSINESSES V. SCHOOLS
When state lawmakers passed the property tax reform plan in June, they said it would end the war between homeowners and school districts. However, the legislation may have opened a new front — a war between businesses and schools.
“I absolutely believe that,” said Scott Price, spokesman for the S.C. School Boards Association, adding school districts should not be blamed for raising taxes. “If I knew I was about to be put on a fixed income, I’d want to best position myself for that.”
Across the state, school districts are weighing their options.
Colleton County is considering a $90 million construction plan — using alternative financing that the tax reform law bans at the end of the year. That plan would cost a business owner with a $100,000 property up to $246 more a year.
The Spartanburg 5 school district has raised its tax rate by about $216 per $100,000 of a business’s value, a 10 percent increase.
That increase is unrelated to the new tax rules, said district finance director David Hayes. Most of the increase is to pay for a school construction plan announced in 2005, he said. The rest is to cover increasing costs the district has paid for from its savings during the last few years.
Facing the prospect of smaller future revenue increases, some school districts have opted to increase their tax levies now, rather than spend savings they may need in the future.
Lexington 1, for instance, voted Monday to raise its taxes by $90 for a business valued at $100,000. School officials said they raised taxes rather than spend about $900,000 in savings.
CHAMBER FEARS JOB LOSSES
The state chamber lobbied hard against the tax swap, saying it will cost businesses each year. The chamber estimated the original tax swap, twice the size of the one approved, would cost companies about $500 million a year.
The chamber still is working out what the approved plan will cost, said vice president Marcia Purday. But higher taxes could cost the state jobs and result in higher prices, she said.
“You are seeing the school boards implementing substantial increases,” Purday said. “We do believe they are raising it because of the cap.”
Sen. Martin, who also opposed the tax swap, says what the school districts are doing is “counterproductive.”
“We support public education,” Martin said. “But there are limits as to what constitutes responsible budgeting. They’re taking full advantage of this situation.”
Martin has asked a bill be drafted that would roll back tax rates to 2005 levels and use that year as the base for future increases based on growth and inflation. The bill, if approved in 2007, would make moot any tax increases passed this year.
TAKING A STAB AT COOPERATION
In Batesburg-Leesville, Lexington District 3 and businesses have tried to work together.
“We sure didn’t want to be hit with additional taxes,” said Jim Mitchell, who owns an office supply store in town. “There was a fairly strong sentiment expressed by the business community about the (tax rate).”
Still, the district has proposed an 8 percent increase — that would cost a business valued at $100,000 $132 more per year — rather than dip into its savings to pay rising costs.
Lexington 3 superintendent William Gummerson, a member of the local chamber of commerce, said he had to balance paying for the district’s long-term improvement plans with the concerns of Mitchell and other business owners.
“Every plan we look at, it doesn’t look like we can do it,” Gummerson said of holding the line on taxes.
Gummerson acknowledged “any increase this year hits (businesses) twice as hard.” But, he added, “This (statewide tax reform) bill really stops any progress we’re making.”
Mitchell credits the school district with improving, adding he understands the decision to raise taxes. But, he said, that decision hits his bottom line.
“There is a practical side of me that says that’s probably good strategic thinking,” he said. “They’re doing what they think is absolutely necessary.”
But, he added: “How much they’re listening to the business community, I’m not really sure.”
Reach O’Connor at (803) 771-8358.
