South Carolina has been ill served by a piecemeal approach to tax policy, and changing just one provision in the controversial Property Tax Reform Act would perpetuate that.
Realtors are trying again this year to get lawmakers to repeal the law's requirement to set a new taxable value for a property when it is sold. They say a resulting increase in property tax bills chills sales and is unfair because similar properties in the same communities can have very different tax bills.
They don't mention that the "point of sale" assessment offsets the law's 15 percent cap on reassessment values for all properties over five years. And they don't mention its cap on property tax rate increases -- the other half of the tax bill equation.
The law's different provisions all have advocates and detractors, depending on how a particular provision affects the pocketbook. Local governments cry foul at the proposed point-of-sale change because it could reduce their tax bases even as they already face decreasing revenue. And they might not be able to make up the difference in revenue from that reduced tax base because of the law's limits on tax rate increases.
Charleston Mayor Joe Riley warned lawmakers Tuesday that the proposed change would cut $260 million from county and city budgets next year, a figure that would increase to $738 million a year in a decade.
That will hurt local governments' ability to provide critical public services, Riley said.
The bill moving through the House calls for an exemption on the difference between a property's new market value and the value on the tax rolls if the new value is higher. Property tax assessors would have to reset values for properties that changed hands in 2007, 2008, 2009, 2010 and before the law's effective date in 2011 to reflect the new requirements. There would be no refunds due to the lower taxable value.
A similar bill has been introduced in the state Senate.
The point-of-sale provision is just one of many problems with this law, all of which lawmakers were warned about.
The law also allows those with fast-appreciating property values to shift the tax burden to owners whose property isn't appreciating at the same rate.
It lifts from resident homeowners the burden of property taxes for school operations and puts it on second-home and commercial property owners, whose property already is valued for taxing purposes at a 50 percent higher rate than for resident homeowners. It increases the state sales tax, a regressive and unstable tax source, by 20 percent to provide property tax relief for resident homeowners. Inequities abound.
Lawmakers should take up the law in its entirety, not just one aspect of it, and they should take it up in the context of overall tax reform. Until they do, we'll see more "unintended" consequences and no real tax reform.