State Sen. Davis: Property tax reform unlikely this year

State Sen. Tom Davis, R-Beaufort
State Sen. Tom Davis, R-Beaufort

The window has closed on a Beaufort County legislator's chances of passing a bill this year that would provide property-tax relief for nonresident homeowners and businesses.

But that has not stopped state Sen. Tom Davis, R-Beaufort, from rallying lawmakers' support for his proposal, which hinges on a pending S.C. Supreme Court ruling on sales-tax exemptions.

Davis has been busy this year touting a plan to lower property-tax rates on rental property, second homes and businesses while also generating more state education dollars for Beaufort County and other coastal school districts.

A group of local real estate agents objects to the plan, branding it a bandage for the state's long-term problem of funding school operations.

At issue is Act 388, a controversial tax change approved by the legislature in 2006. It exempted owner-occupied homes from property taxes that fund school operations. The act also increased the statewide sales tax by 1 cent on the dollar to replace the lost revenue.

Owners of businesses, second homes and rental property were left out of the tax-relief plan, meaning they pay property taxes for school operations while resident homeowners -- many of whom have children attending public schools -- do not.

Davis and the group of local real estate agents believe the disparity is unfair -- even immoral -- and that it cripples capital investment and discourages people living elsewhere from buying property in the state.

To address those inequities, Davis proposes following some recommendations from a 2010 panel of tax and finance experts that would eliminate about 60 popular sales-tax exemptions.

The elimination would generate about $800 million to $1 billion that would offset the loss of property-tax revenue by providing relief to second homeowners and commercial properties, Davis said.

But the plan will only work if -- as Davis predicts -- the state Supreme Court decides the sales-tax exemptions are unconstitutional and allow lawmakers to handpick products and services that should be exempt.

Davis has not filed a bill, and he said other lawmakers have told him they would not be willing to support it unless a court ruling provides them political cover.

Further, not enough time remains in the legislative session to pass such a major tax reform, even if such a ruling is delivered, Davis acknowledged this week.

Instead, he has been busy setting the stage for next year, courting lawmakers from coastal areas to commit to using the money from eliminating tax exemptions to pay for tax relief.

"It's important that we build consensus now about using that money for tax relief to help make South Carolina a place where businesses and entrepreneurs are more likely to come than it is now," Davis. "Otherwise, that money simply gets spent."

Attempts Thursday to reach Senate President Pro Tempore John Courson, R-Columbia, and House Speaker Bobby Harrell, R-Charleston, were unsuccessful.

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