Point-of-sale compromise falls short of real reform

A compromise on "point-of-sale" assessments passed by the legislature last week is better than past efforts, but it doesn't address fundamental problems with the state's property tax law.

It also lets lawmakers off the hook for another year -- or two or three -- in tackling substantive tax reform. This compromise buys time for lawmakers and gets the real estate industry off their backs, at least for a while.

Unfortunately, it does nothing to simplify an already too complicated law; it only adds to the complexity.

The bill, which hasn't been signed by Gov. Nikki Haley, knocks off 25 percent of the new market value for commercial and rental properties and second homes when a property is sold. The discounted value can't fall below the existing taxable value.

If a property's new value is lower than the old value, the new value goes on the tax rolls.

The changes are expected to help commercial and second-home property sales, an important segment of the market here.

But the changes also mean less money for local governments and school districts to provide critical services. Fortunately, the impact on revenue is smaller than a previous proposal, which would have eliminated point-of-sale reassessments for all types of property.

For local governments, it loosens some of the law's limits on raising tax rates. The current law limits a tax rate increase to the percentage change in population, plus the rate of inflation. If a local government doesn't raise the rate in a given year, it loses forever the opportunity to do it.

This bill would allow a local government to go back up to three years to tap a tax rate hike it had previously passed up.

That reduces the pressure to increase the tax rate every year, but it still limits local elected officials' ability to make taxing decisions they deem best for their communities.

For resident homeowners, nothing changes.

Property assessment increases are still capped at 15 percent over five years for all properties when there's no ownership change.

We will still see next-door neighbors paying very different property tax bills, depending on when they bought their property.

We'll still see second homeowners and commercial property owners paying school operating taxes, while resident owners get a pass on that very significant portion of the real property tax bill.

We'll still see nonresident homeowners switch to resident status to escape those school operating taxes without the state adequately compensating school districts for the lost revenue through a 1 percent sales tax.

Nor do we expect to see adequate changes in the law to account for the impact on a school district's tax-raising ability as a result of such switches.

This compromise might be better than previous proposals, but less bad still isn't good enough.