Real tax reform means everything on the table

Disappointing but not surprising is the best way to describe the "comprehensive" tax review we're getting from lawmakers. True reform takes courage, and too often that's in short supply.

Lawmakers are close to passing a joint resolution that sets up a "taxation realignment commission" to study the state's tax code and recommend changes.

The commission is directed to turn in a report by March 2010 that is a "detailed, comprehensive and careful evaluation of the state's tax system."

Its 10 voting members are to have academic or professional experience in public finance, government budgeting and administration, economics, accounting or tax law.

That looks like real tax reform.

But the bill specifically takes off the table the school operating-tax exemption for owner-occupied homes. As anyone who's looked at aproperty tax bill in recent years can tell you, that's a lot to take off the table. And if you're a second homeowner or commercial property owner, you're left wondering where that leaves you. Second homeowners, a mainstay of our economy, have complained about bearing the burden of school operating taxes. They already pay on a higher taxable value, and when they're here, they pay the sales tax that replaced resident homeowner taxes.

Gone, too, is requiring a super-majority vote to change the recommended reform package.

The legislature also is close to taking away "point-of-sale" reassessment, a major portion of the Property Tax Reform Act of 2006, in a separate bill.

Postponing point-of-sale reassessments until the next countywide reassessment removes the counterbalance to the 15 percent cap on reassessments that also is a part of the 2006 law.

That legislation should not have become law outside the context of a comprehensive review of taxes in South Carolina. Changes to it now should not come outside that context.

But real estate interests are clamoring for a change to the provision, which they say is hurting sales in an already depressed market.

We opposed the Property Tax Reform Act in 2006. It was easy to see what would happen. The 15-percent cap, point-of-sale reassessment and school-operating tax exemption lead to neighboring owners in similar homes paying vastly different property tax bills. Similar laws in Florida resulted in the "Save Our Homes" movement becoming "Slave to Our Homes."

Unfortunately, South Carolina suffers when tax law is written to satisfy that day's special interests and not the interests of the state as a whole. The Property Tax Reform Act is a prime example of that.

In a recent interview posted on the S.C. Senate Republican Caucus Web site, Sen. Tom Davis of Beaufort says he doesn't expect lawmakers to take away the exemption on school operating taxes for primary homeowners even though it shifted the tax burden to second homeowners and commercial and industrial property owners.

"It's almost impossible to increase that tax, politically, once you've taken it away," Davis said.

Instead, he predicts that if there's going to be a "fix," it will probably involve an increase in a sales tax, with the money used to provide similar tax relief to second-home and commercial property owners.

That's a very scary scenario. Our over-reliance on sales tax revenue is at the heart of our budget problems today. That doesn't sound like reform; it sounds like more of the same.

Let's hope he's wrong, and let's hope we see real reform from the commission, lawmakers and the governor.