Property tax relief plan: Already doomed?

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State Sen. Jim Ritchie says there were too many competing interests for the Senate to agree on a broader plan.
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COLUMBIA -- Pat McCall says the state Senate performed a neat trick last week: Passing a property tax relief plan that has no chance of providing property tax relief in Spartanburg County.

After a year of wrangling, the Senate on Thursday settled on a proposal that would allow voters in individual counties to decide whether to increase the local sales tax to eliminate school operating and other property taxes. McCall, a Spartanburg real estate developer and a member of the anti-property tax group nohometax.org, believes the plan is doomed from the start.

"I don't think there's a chance in heck that it will happen here, or in a lot of counties," McCall said. "Spartanburg County voters turned down a local option sales tax referendum a couple of years ago despite tremendous support," McCall said.

But Sen. Jim Ritchie, R-Spartanburg, a major architect of the plan, said the local option was the last option. After all the meetings and all the debate, Ritchie said it was clear that there were too many competing interests -- property owners, school districts, municipal governments, businesses -- for the Senate to ever reach a consensus on a broader plan.

"We all would have preferred a statewide solution," Ritchie said. "But after 20 votes, we offered this plan as a lifeboat to protect property owners and give them real tax relief."

In addition to giving voters the chance to adopt a local-option sales tax to erase property taxes, the Senate plan increases the state sales tax by a half-penny, to 5.5 cents on the dollar, to remove the county operating property taxes from all owner-occupied homes. Groceries and hotels would be excluded from the higher tax.

That provision covers homes valued at up to about $240,000, Ritchie said, which picks up about 85 percent of the state's houses.

If voters in a county choose to increase the sales tax, the plan eliminates a school district's or county government's ability to raise the property taxes.

"That's important because it prevents residents from paying high property taxes and the higher sales tax," Ritchie said.

Sen. John Hawkins, R-Spartanburg, said he would have preferred that the Senate approve the plan that the House passed earlier this year. That bill calls for a 2-cent increase in the state sales tax to eliminate 85 percent of the property taxes on owner-occupied homes.

But Hawkins said no matter how many times the House version was tweaked, it was shot down.

"There for a while it looked like a circular firing squad," Hawkins said.

Ritchie said one of the obstacles to providing comprehensive statewide relief was the concern that businesses would bear the brunt of future property tax increases.

"That would cost us jobs and hurt our economy," Ritchie said. "That's why handling it on a local-option basis provides a better balanced environment for homeowners and the business community and keeps us competitive."

Mark Sweatman, a spokesman for the state Chamber of Commerce, said the plan does just the opposite. He gave the House plan the same rap.

In either case, Sweatman said, businesses will pay higher property taxes and a higher sales tax. He said the combination would make it difficult for the state to attract new businesses.

"You want to talk about competitiveness, that's down the tubes," Sweatman said. "Companies will just go to North Carolina or Georgia."

McCall said he believes timing could be one explanation for the difference in the two plans: House members are up for re-election this fall, while senators don't face the voters for two more years.

Hawkins said he understands why anti-property tax groups aren't happy with the Senate proposal. But he said he'd rather have the local option bill than nothing at all.

"If people want to take advantage of it, it could be a great way to reduce our property taxes," he said.

Ritchie said he believes voters will take advantage. He disagreed with McCall's contention that Spartanburg County voters would never approve a swap.

"I think the people of Spartanburg County will make the decision on what is in the best long-term interest of property owners, education and business," Ritchie said. "I trust them to make that decision when they have the opportunity."

But Spartanburg County Administrator Glenn Breed said that history could be a good indicator. In the eight years that he's lived in the county voters have twice said "no" to raising the local sales tax -- once to reduce property taxes and once to fund road maintenance.

Hawkins said he believes voters didn't go for the previous attempts because they didn't trust the local government and feared paying even more in taxes. The cap in the Senate bill should erase those fears, he said.

Breed said he hasn't had the opportunity to run any financial models to determine the Senate plan's impact on Spartanburg County. But he is wary of the proposal.

"It concerns me that the control would be taken away on the local level," he said.

The Senate will meet in special session on Monday to give the bill third reading. Then it will go to a conference committee, where House and Senate members will try to work out the differences in the two versions.

That could prove to be a monumental battle. Not since the state approved a lottery have two bills been more vastly different, Ritchie said, and hammering out a deal will be even testier.

"This one will be more difficult because of the unintended consequences that arise when you try to shape a compromise between two such different plans," Ritchie said.

Rep. Scott Talley, R-Moore, said he wants House conferees to hold the line. He said he's disappointed that the Senate went for a "pseudo form of tax relief."

"I hope the taxpayers will realize that this is a far cry from the real tax relief they've been waiting on for a long time," Talley said "This was a chance to get something done. I hope the people will appreciate the work the House did and see the Senate's action for what it is – getting the monkey off their backs without providing real relief."

Robert W. Dalton can be reached at 562-7274 or bob.dalton@shj.com.