At last week’s meeting of the Beaufort County’s state legislative delegation, County Council vice chairman Paul Sommerville stood during public comment and had a suggestion for the delegation: They should create a loophole to get around a state tax law that restricts school funding.
“We’re desperate,” he told state Reps. Bill Herbkersman, Wes Newton, Jeff Bradley and Shannon Erickson and state Sen. Tom Davis on Wednesday at the Buckwalter Recreation Center in Bluffton.
During budget and millage talks last month with the Beaufort County School District, Council members complained of the undue burden a controversial state law, Act 388, has placed on secondary homeowners, landlords and businesses to make up for a shortfall in school operational taxes.
Sommerville said Wednesday he has two ideas on how the county could make up for the limitations of Act 388 and put some of the school funding burden onto primary home owners, who are exempt from paying school operating taxes in favor of a one-cent sales tax increase.
“I’m not taking on Act 388,” he said. “I’m going around 388.”
That math of 388 works out for some of South Carolina’s 85 school districts, but not for Beaufort County. That’s because the sales tax reimbursements the state sends to counties to make up for the loss of primary residence property taxes — referred to as “4 percent” properties — are still based on property values from 2008, when the act went into effect.
“That pool of 4 percent properties keeps getting larger and larger,” Davis said. “But you’re only getting reimbursed from those 4 percent properties from 2008.”
While the county’s makeup has changed, Act 388 has not. The law was passed late in the 2006 legislative session, written hastily on a state representative’s chicken takeout box. And according to Sommerville, it’s barely been touched since, with its opponents citing the inherent danger of increasing taxes on primary homeowners.
On Monday, he called the idea of changing the law a “political third rail.”
One of Sommerville’s suggestions to state legislators is to pass a one-cent local option sales tax in the county, which he estimates would make around $30 million for the county per year and go toward local government funding, which would include the school district, townships and the county.
The other is to allow Beaufort County to vote on a referendum that would approve shifting 25 percent of school operating taxes to primary residence owners. Sommerville said that he thinks retirees and families with schoolchildren in the area, who make up a large portion of these homeowners, would support the measure.
“It’s a matter of conscience,” he said. “The 25 percent is arbitrary. I don’t want it too high to scare people.”
Davis said Monday he prefers a more holistic approach to reforming Act 388. First, he wants to update the data the state uses for reimbursements, to reflect growth in the state. Then, he wants to revise the act to its original form.
Davis was the chief of staff for then-Gov. Mark Sanford when Act 388 was passed in 2006. It was initially sold as a 2 percent increase in the sales tax across the board, with the trade-off being a total exemption of property from school operating taxes.
“My preference is to address the Act 388 problem in a universal way,” he said. “I’d like to see its original purpose fulfilled, to bring tax relief to all categories of property. I’m not in favor of repealing the act and putting the tax back.”
Davis said he believes representatives from other growing counties, like Horry and Charleston, would also support this reform.
While they differ on the method, both Davis and Sommerville want change. Sommerville said that as a landlord, he sees the burden of Act 388 firsthand — and he knows what his solution as a citizen is.
“I always vote myself a tax increase,” he said of his record on passing school budgets. “And I always pass it along to my renters.”