COLUMBIA -- A compromise on the property tax issue that seemed close Wednesday morning fell apart Wednesday evening, threatening to extend the legislative session and wreck budget plans.

House leaders had unveiled a new tax relief plan earlier in the day to try and break an impasse with senators. But the Senate's counter offer Wednesday evening left one House leader angered and both sides further apart.

"I think it's ridiculous," House Majority Leader Jim Merrill said of the Senate's offer. "I think it's an embarrassment and I'm dramatically disappointed. And I think most of the voters in South Carolina should feel the same way."

Merrill said the Senate's proposal increases the possibility that the Legislature won't act on a proposed new budget and will instead enact a continuing resolution to use last year's budget. Such an action would cut out up to $1 billion in planned new spending.

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"At this point, where it leaves us is I hope everybody enjoys last year's budget and we will continue on that direction," he said. "At least we will achieve some taxpayers' savings by not increasing the budget over last year's."

Sen. Hugh Leatherman, who chairs the six-member panel of House and Senate lawmakers working on a compromise, couldn't be reached for comment. Earlier Wednesday he said, "We need to resolve this issue and move on."

Leatherman said he hoped the group could reach an agreement this week.

The stalemate is holding up further talks on the budget and any final agreement on property tax reassessment with four scheduled days left in the legislative session.

Legislative leaders have drafted legislation to extend the session, though House Speaker Bobby Harrell said earlier Wednesday it was still possible lawmakers could finish by their scheduled adjournment of June 1.

Leatherman disagreed and said an extended session -- which could cost taxpayers up to $50,000 per day -- is "inevitable." He said lawmakers negotiating the budget may work through the weekend if a compromise can be worked out on the property tax issue in the next two days.

The committee working on a budget compromise hasn't met since Monday, after House members said they wanted to see an agreement reached first on property tax.

"The people of South Carolina demand a solution, not a Band-Aid, to the property tax problem," said Rep. Bill Cotty, a Columbia Republican who leads House negotiators on the property tax issue. "This is our chance. If we don't find a solution this week, we will have to wait until 2008 for another chance. That is too long."

The new House tax-relief plan would increase the sales tax by 1 cent per dollar to remove school operating taxes. It would also reduce the sales tax on food from 5 cents per dollar to 3 cents per dollar. The grocery tax break would be funded from new budget surplus money. A constitutional amendment would make the homeowners' tax break permanent and adopt the Senate's proposal for capping reassessment.

The plan passed by the House earlier this year would increase the sales tax by 2 cents, eliminate all sales taxes on groceries and remove most taxes on owner-occupied homes.

The Senate passed a plan that would allow each county to choose whether to eliminate or reduce taxes by raising local sales taxes.

Leatherman has said the Senate would object to any permanent removal of school taxes, saying communities should be given the power to increase school taxes in the future. He said Wednesday he doesn't think the constitutional amendment will fly.

"There is not 31 votes in here for that constitutional amendment," he said.

The Senate's counter-offer accepts the 1-cent sales tax but requires that some of it go to county operating taxes. It also says the Senate won't approve any constitutional amendment making the tax break permanent and that communities should be allowed to hold a referendum to raise taxes in the future.

The response says the Senate would agree to exempt food from any increase in sales tax but wouldn't approve a reduction in the sales tax on food.

"It surprises me that one of the sticking points is a local option for a referendum on the re-implementation of property taxes that is not in either bill," Merrill said. "That surprises me a lot."

The House had proposed capping reassessment increases by limiting any increase to the time the property is sold or changes hands. The Senate's reassessment plan would cap increases to 15 percent during any five-year period. But the Senate also requires that each county wanting the cap to vote on it, something the House doesn't include in its proposal.

Gov. Mark Sanford on Wednesday backed the new House tax-relief plan and urged senators to approve it.

"Providing real relief for South Carolina families in the form of property tax and food tax reductions is a strong step toward the type of immediate relief we've been calling for," Sanford said.

"While we continue to believe more should be done to return dollars to taxpayers using this year's surplus, the House has offered a reasonable middle ground between what we've asked for and the original House and Senate proposals. I'd urge the Senate to adopt this plan quickly in order to give homeowners some relief rather than walking away from this session with nothing."

Some Democrats, meanwhile, argued against the new House plan, saying it rewards bigger and faster-growing counties at the expense of rural and poorer counties.

Sen. Vincent Sheheen, a Camden Democrat, and Sen. Brad Hutto, an Orangeburg Democrat, argued that the plan would primarily help those who don't need it, since those with homes valued at less than $100,000 would see little school tax relief.

They showed a chart which lists five of the state's most affluent and urban counties, including Greenville, as receiving more than half the tax-relief money under the new House plan.

And if the plan is enacted and schools need more money, the millage would have to be increased on businesses, rental property and vehicles, they said.

"Property tax relief is not something we should do because it's good in an election year," Hutto said. "It's something we should take a comprehensive look at. This plan is just guaranteed to create inequities."