Date Published: June 4, 2006   

State budget contains good news, bad news

There’s good news and bad news in the $6.6 billion budget that the S.C. General Assembly approved this week.

Property tax relief made it through the often contentious session, freeing up homeowners from paying school operating costs on their homes beginning next year. That’s good news — of a sort. But by knocking off that tax, school districts will have to rely more heavily on funding from an increase next June in the state sales tax from 5 cents on the dollar to 6 cents. However, if the economy takes a dip, sales tax collections would also suffer. And that would impact school funding — not good news. Sales taxes are always vulnerable to the vagaries of the economy.

Home rule for counties is also taking a hit, since they will be required to receive approval by a two-thirds vote in both House and Senate if they want to increase taxes. Big Brother in Columbia will have the final say-so on what’s best for each and every county in the state. So what’s the point of having elective county councils answerable to local taxpayers? The same goes for school boards.

Some good news for consumers is the decrease in grocery taxes from 5 cents on the dollar to 3 cents. Still, there are a number of food items that the poor spend a disproportionate amount on that won’t be affected by the decrease.

The bad news for businesses is that their taxes will be hiked to pay for the tax relief given to homeowners, but not all homeowners, since those with modest homes or property can look forward to tax increases. The wealthiest homeowners receive the biggest tax breaks because of a 15 percent cap on the assessed value of homes.

There is some good news for the 18 under-funded rural school districts that will receive an extra $2.5 million apiece to help equalize funding for their mostly poor students, a step toward equity in education in the view of lawmakers. And along those same lines, the General Assembly also appropriated $23 million for early childhood education in the poor districts to address shortcomings cited by Judge Thomas Cooper in his December ruling on the adequacy of the state’s funding for education.

Looming over all this are vetoes threatened by Gov. Mark Sanford when the Legislature returns to Columbia on June 14, the day after party primaries, to fully ratify the state budget. However, given Sanford’s lack of success in making his vetoes stick with a General Assembly increasingly disgruntled with his leadership, there’s little chance of any major changes in the final state budget.

Not that Sanford should mind too much. His ongoing war with the Legislature provides him with additional ammunition in his re-election campaign to portray lawmakers as obstructionists and anti-reform zealots, thus boosting his approval ratings among voters. It may be savvy, hardball politics, but so far the governor’s scorecard after four years in securing cooperation from the Legislature in supporting his agenda is a big fat zero.

Still pending, and much needed after all the dust has cleared, is comprehensive tax reform in South Carolina. There’s more to it than just property tax relief, as beneficial as that may seem to property owners. The three-pronged system of property taxes, sales taxes and income taxes relied upon by state government to serve its people needs a thorough and impartial examination free of politics and questionable short-term solutions.

Until then, we will remain apprehensive about the wisdom of relying heavily on sales taxes to compensate for the shortfall in property taxes, as pleasing as that may be in the eyes of most homeowners in this election year. With the passage of another year, we should have a better fix on whether property tax relief is the panacea for responsibly funding essential government services for all the people of South Carolina.