System would limit tax increases on homes with rapid appreciation
Swapping a higher sales tax for nearly $600 million in property taxes marks
a significant shifting of the tax burden in South Carolina, but it will be
up to the state's voters to decide whether to constitutionally alter the way
real property is assessed.
In a referendum this November, voters will consider whether to amend the
state constitution in order to cap at 15 percent the amount a property's
taxable value can increase every five years.
Properties that are sold would be taxed at full value at that time, and
assessments also would increase to reflect improvements. Such a system would
limit tax increases on properties that have quickly appreciated in value,
while shifting some of the tax burden onto properties whose values have
lagged behind and properties recently sold.
The state Board of Economic Advisors estimates that if voters approve the
change, it would have no affect on taxes in 2007, but would redistribute
$372 million in property taxes during the following five years.
Of that amount, $244 million would be shifted to properties reassessed
because they were sold, and the remaining $128 million would be shifted to
other classes of property, as local governments raise tax rates to
compensate for having less property value to tax.
This should seem familiar to South Carolinians, and particularly residents
of Charleston County, which in 2000 put a 15 percent assessment cap in place
for owner-occupied homes, only to see the South Carolina Supreme Court
strike it down because it applied to a particular class of property.
The court later ruled against another Charleston County assessment cap plan
that would have applied to all property, following a challenge by North
Charleston, with the court saying the cap was invalid because it did not
apply statewide.
A 2004 attempt to pass a statewide 20 percent cap was derided by business
groups, including the S.C. Chamber of Commerce, whose president called it "a
reverse Robin Hood" plan that would raise taxes for businesses and people
with lower incomes in order to "subsidize people living on the beach."
Assessment cap supporters argue that property owners shouldn't be subjected
to huge tax increases just because the house they live in would be worth
considerably more than they paid for it, were they to sell.
The 20 percent cap plan was approved in 2004 by the General Assembly but
vetoed by Gov. Mark Sanford, who believed it was unconstitutional and would
hurt school districts.
Now, voters will be asked to amend the state constitution so that an
assessment cap can be enacted statewide.
"I'd be stunned if that didn't pass," said House Majority Leader Jim
Merrill, R-Charleston and Berkeley.
The yes-or-no ballot question will read: "Must Article III and Article X of
the Constitution of this State be amended to authorize the General Assembly
to establish the method of valuation for real property based on limits to
increases in taxable value, adjusted for improvements and losses, of no more
than fifteen percent over a five-year period, unless an assessable transfer
of interest occurs; to provide that for purposes of calculating the limit on
bonded indebtedness of political subdivisions and school districts, the
assessed values of all taxable property within a political subdivision or
school district shall not be lower than the assessed values for 2006; and to
provide that the General Assembly, by general law and not through local
legislation pertaining to a single county or other political subdivision,
shall provide for the terms, conditions, and procedures to implement the
above provisions?"
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