Thomas proposes property tax cut

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Saying the increase has overburdened taxpayers, Sen. David Thomas of Fountain Inn on Thursday led a group of senators in proposing a plan to nearly eliminate property taxes on homes and vehicles by increasing the sales tax by 2 percent.

"This is a frontal assault on the ad valorem tax system in South Carolina because it is not just broken, it is in crisis mode," Thomas told reporters. "People who own homes and cars and trucks are being taxed out of those homes, cars and trucks. Real estate values are in dramatic danger over the next decade because people will not be able to pay for the higher and higher reassessments."

Sen. Kay Patterson, a Columbia Democrat and member of the Senate Finance Committee, said he likes the bill because it offers help to those on the "lower end of the economic totem pole."

"They really can't afford to make the mortgage payment on the home after the reassessment," he said. "I'd rather pay a penny or two more in tax to help poor people stay in their homes who can't afford them after reassessment."

Paul Cook, 80, said the value of his three-bedroom McSwain Gardens home and lot in Greenville was raised by 95 percent. Cook was one of many who complained but saw little relief.

He also liked the proposal.

"I think it's great," he said. "That would be fair for everyone."

Thomas said without some action by lawmakers, the spiraling increases in reassessments over the next 10 years will spur a "collapse in the real estate market," as more and more middle-class families are unable to pay their tax bills or shy away from purchases because of the tax burden.

The plan, which Thomas suggested in last year's legislative session, would use the $1 billion generated by the sales tax increase to reimburse local governments for the lost property tax revenue. The sales tax increase would go into a trust account, Thomas said, outside the budget process. The plan would also freeze commercial property tax rates.

Voters ultimately would have to approve the plan as a constitutional amendment because it stops local governments from raising tax revenue.

School boards could continue to use property tax to pay for bonds in building projects, about 10 percent of the average property bill, Thomas said. And the legislation would not interfere with any fee-in-lieu of tax arrangements local governments negotiate with industries or businesses.

Will Folks, a spokesman for Gov. Mark Sanford, said the governor would consider any tax plan that "is going to create jobs, grow capital investment and raise income levels."

Sanford and House Speaker David Wilkins proposed their own tax plan this week, which would cut the state's income tax rate by nearly a third over the next 10 years.

Thomas said he has spoken with Sanford about his plan and the two proposals are not in conflict.

But other lawmakers have proposed their own remedies for property tax relief. One House bill proposes using a sales tax increase to reduce school taxes, about 45 percent of a homeowner's bill. Another bill, approved this week by the House budget-writing committee, would cap reassessment increases at 15 percent, while another would limit reassessments to the sale or transfer of property.

Thomas said the House measures deal with "half a loaf. This is the whole enchilada."

Cook likes Thomas' plan.

"The property owners now are carrying the state, that's the way I see it," he said. "The people who don't own property don't pay it."

Sen. John Kuhn, a Charleston Republican and co-sponsor of the bill, called property taxes "the most unfair thing in South Carolina."

"Retired people are finding themselves renting their homes from school boards and the government," he said.

Sen. Jake Knotts, a West Columbia Republican, said property taxes hold homeowners "hostage." He said the issue is far more serious than any concerns about the state's income tax.

"In 10 years, I have not gotten a single call about the income tax," he said. "But I had 12 calls on my way here this morning about property taxes."