THE GOOD FIGHT ‌ Death and Taxes 

Taking a read on the tax reform debate

The squeaky wheel gets the grease, and in recent years, the squeakiest wheel in South Carolina has been homeowners wailing about property taxes.

They have much to cry about, to be sure. Homeowners in the ever popular coastal counties and in the fast-growing Upstate counties of Greenville, Spartanburg, and Pickens have seen their property values — and with them, property taxes — go through the proverbial roof.

The result has been a grassroots uprising against property taxes, led by such groups as the S.C. Homeowners Association. The good news is that the General Assembly has responded, demonstrating that at least on some level, for some people, democracy works in South Carolina. The bad news is that legislators have proposed a host of laws, the most radical of which would do away with property tax on residences altogether. Among policy wonks, it is understood that a good tax structure is one that relies on sales tax, income tax, and property tax — the old "three-legged stool" of public finance.

That some lawmakers want to cut one of the legs off of that stool has a lot of people upset, especially in the education and business sectors.

Tax cutters are the ones with the loudest voices and the ones who have received the most attention in the past year. For that reason, it seems fitting that the League of Women Voters gave time to some alternative views on tax reform.

At a forum on the College of Charleston campus last Wednesday night, some 100 people came out to hear four voices express serious skepticism over the tax-cutting frenzy: Holley Ulbrich is an economics professor and senior fellow at the Strom Thurmond Institute at Clemson University. Bill Scarborough is a business owner and represented the Charleston Metro Chamber of Commerce. Nancy Cook is chairman of the Charleston County School Board. And Bill Moore is a professor of political science at the College of Charleston.

All the panelists took the position that a radical reduction or elimination of property taxes will have unintended and unpleasant consequences elsewhere, either in reduced services — particularly in the field of education — or in sharp increase to other taxes. Ulbrich and Moore said that major property tax cuts would mean a shift of the tax burden from the rich to the middle class and the poor.

Scarborough said that tax relief proposals before the General Assembly today would shift $490 million dollars in tax to businesses, which are the engine of the economy. He was also fearful that the tax cutters would ultimately hurt education and that would also hurt business. "The first thing people want to see when they come here to build a factory is our public schools," he said.

Cook suggested that any property tax reform include a sunset limit of no longer than three years, forcing legislators to revisit the law and assess its need and impact.

Ulbrich had a better idea: "Tell your legislators to just say 'No'" to property tax reform, she said. South Carolina already has one of the lowest property tax rates in the nation — 47th among the 50 states and D.C. — and the problem is limited geographically and temporally. The housing boom seems to be cooling off, she said, which will help bring property taxes under control. It is bad governance to radically and permanently alter the state tax structure to meet a temporary and local need.

There are better ways to address the property tax crisis, Ulbrich said. One of these is circuit breakers, a form of relief which kicks in when a tax owed exceeds a certain percentage of income. The property owner would then get a reduction or a rebate for the excess amount. Other proposals included raising taxes on cigarettes, lifting the $300 sales tax cap on automobiles and boats, and taxing services.

Perhaps the most encouraging words of the evening came from Moore. Aggrieved property owners have led the debate up until now, he said, but other groups are joining the battle. Research has shown that the most effective lobbying group in Columbia is the S.C. Chamber of Commerce, Moore said. The second most effective is educators; the third most effective is government groups. All of these are against radical tax reform and all are bringing their weight to bear on the General Assembly.

"You will see compromise coming out of this process," he said. "You will not see the elimination of property taxes coming out of this process. You will not see the elimination of property taxes on any class of people."

Until now, competing interests have generated studies, analyses, and numbers to prove their points. What we need now, Moore said, is an independent study of the proposed legislation and its long-term impact.

Something else we need is a cooling-off period on this ugly debate.


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