Senate takes crack at property tax relief

ROBERT W. DALTON, Staff Writer

Now that the state House has passed a property tax relief plan, the Senate takes its first swing at the issue this week.

Up first will be the constitutional amendment placing the issue on ballot in November's general election. It would ask voters to decide whether most property taxes should be replaced by an increase in the sales tax and whether property should only be reassessed when it is sold, transferred or greatly improved.

Then they'll tackle the tax swap proposal that the House pushed through Wednesday. They'll be looking at a bill that eliminates about 85 percent of the property taxes on owner-occupied homes in favor of a 2-cent increase in the state sales tax -- a swap that leaves the plan $117 million short of being able to fund schools and local governments at current levels -- eliminates the sales tax on groceries and caps the growth of government spending.

Sen. John Hawkins, R-Spartanburg, said the shortfall is a flaw that the Senate will have to correct, but he gave House members a pat on the back.

"I'm impressed, because they made a really strong effort," Hawkins said. "I'm absolutely delighted that we're having this conversation because that means were going to get somewhere."

It's a plan that House Speaker Bobby Harrell says makes winners of all taxpayers and losers of no one.

"Folks concerned about losing their homes, folks tired of renting their homes from the government and folks on fixed incomes who have watched their property taxes skyrocket over the years -- they're all big winners if we can get it through the Senate," said Harrell, R-Charleston.

Pat McCall of Spartanburg, who as a member of the grassroots group nohometax.org has pushed for relief, said the bill is "real close" to what the

organization wanted. He said he's hopeful that the Senate will follow suit.

"We knew we'd get a good bill out of the House, partly because they're up for re-election this year," he said. "The big thing now is the Senate."

Some critics of the plan, including some who voted for it, said the losers were just as easy to identify.

Rep. Mike Anthony, D-Union, said that senior citizens of modest income who now enjoy a homestead exemption would, in effect, see a tax increase. He also said that schools and governments took a hit because they lost control of their ability to raise revenue and because they don't know what they'll get back under the House distribution plan.

"Eliminating the grocery tax helps, and that helped sell the bill," Anthony said. "It's not just going to eliminate the food tax for the poor, so it's a win-win for the wealthy. But it was a bill you couldn't vote against."

Rep. Harold Mitchell, D-Spartanburg, found a way to vote against it. His district is saturated with renters and public housing, and he said he saw many of his constituents being hurt by the plan.

"I agree that we need to reform, but there were just too many flaws and red flags going up," Mitchell said. "No one should lose their home to taxes, but in the long haul this may be more of a problem than a solution."

James Douglas, a University of South Carolina political science professor, said Mitchell has a point. People who currently are not paying property taxes or are paying a small amount will end up paying more in taxes because of the increase in sales tax from 5 cents to 7 cents on the dollar.

"The elimination of the tax on groceries will offset some of the burden," Douglas said. "One nice thing about this bill is that it has to be approved by referendum, and there are more poor people than there are wealthy people."

The increase in the sales tax already was about $19 million short of providing the revenue generated by property taxes, according to an estimate of the states Board of Economic Advisors. And a change made during Wednesday's debate that allows local governments to keep the money raised through a local option sales tax added another $98 million to the hole.

House Speaker Pro Tem Doug Smith, R-Spartanburg, said the General Assembly will have to cover that amount, but that it's essentially a larger tax cut.

Douglas, however, said that it could mean cuts in services.

Sen. Larry Martin, R-Pickens, said the Senate would work to balance the scale.

"I'm certainly not going to vote for a plan that's $100 million out of whack," Martin said. "I don't think that's responsible at all."

The plan also limits the growth of state and local governments, through an amendment offered by Smith. His plan limits increases in government spending to population growth plus the consumer price index.

"Let's see if we can pass this in the Senate," Smith said. "It may not be the version we passed, and it probably won't be. But if we can get the point-of-sale reassessment and spending limits, at the end of the day I'll be happy."

Hawkins said he's hopeful that Smith's amendment will survive.

"We've got to get spending under control or we're never going to fix this problem," he said. "If we don't address spending limits, this is going to be a temporary fix and it will come back and haunt us."

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