|
Tax reform winners and losers
South Carolina's property tax reform isn't a tax cut but a
shift of an estimated $582 million in taxation from homeowners to people who
pay sales taxes.
It's a change that benefits some at the expense of others, because the
property tax for school operations is eliminated only for owner-occupied
residential properties. To limit the impact of higher sales tax on
residents, the state cut the sales tax on groceries last year, and will
eliminate it entirely on Nov. 1.
Some of the winners:
--Those who own the homes they live in will benefit from the change, and
those with expensive homes could save thousands of dollars. Homeowners were
already receiving substantial relief from the property tax for school
operations, on the first $100,000 of taxable property value, so those with
less expensive homes will see limited savings.
--Some counties with school districts that raised less than $2.5 million in
operating revenue from property taxes on owner-occupied homes will benefit,
because the tax reform law guarantees each county a minimum of $2.5 million
from the increased sales tax.
--In the coming years, many of today's property owners could benefit from a
cap on reassessments that shifts taxation to more-recent purchasers of
property.
Some of the losers:
--Tourists and other visitors to the state, who will pay higher sales tax
but won't get the benefit of lower property taxes or the elimination of the
grocery tax.
--Those who rent.
--Those who own property that will receive no tax relief, such as rental or
commercial properties.
--People with incomes low enough to qualify for food stamps, who will pay
higher sales tax but won't benefit from the elimination of the tax on
groceries. Groceries bought with food stamps were already exempt from sales
tax.
|
Real estate tax bills will soon
be arriving in mailboxes across Berkeley, Charleston and Dorchester
counties, giving local homeowners their first look at the
dollars-and-cents results of property tax reform in South Carolina.
"What they can expect, and what may be upsetting to some of them, is that
they might not be getting as big of a break as they are expecting," said
Dorchester County Auditor Johnette Connelley.
The typical homeowner would save several hundred dollars, but might be
expecting to save more.
Some state officials, and others who supported increasing the sales tax in
order to reduce the property tax, have said the change would reduce the
typical homeowner's property tax bill by 50 to 60 percent.
The tax shift eliminates the portion of property taxes that pay for school
operations, but only for owner-occupied residences.
The statewide sales tax was increased 20 percent, to six cents on the
dollar, this summer in order to pay for the property tax relief.
Gov. Mark Sanford said last year when he signed the tax legislation that
it would mean "cutting the average homeowner's bill by more than 60
percent."
The fact is, the state already had a system that provided significant
relief from school property taxes on up to $100,000 of a home's taxable
value, so most homeowners will save less under the new system than some
have suggested.
In Charleston, for example, a homeowner can expect see the property tax
bill on the first $100,000 of their home's value drop by about 17 percent
compared to last year.
"People with homes worth $100,000 or less were already exempt from (most)
school operating taxes," said Connelley, who was president of the South
Carolina Association of Auditors, Treasurers and Tax Collectors when the
tax reform legislation was approved last year.
The large tax savings some homeowners will see comes from eliminating the
school tax on property worth too much to have qualified for the old
version of tax relief.
The same homeowner in Charleston who will get a 17 percent tax cut on the
first $100,000 of his home's value will get a 49 percent tax cut on
property value above $100,000. |
|
In other words, those who were paying the most
property tax will save the most.
The owner of a $1 million home in Charleston will save about $3,400 on
property taxes, while the owner of a home worth $100,000 will save around
$80.
The shift from property tax to sales tax was a coup for
anti-property-tax groups like nohometax.org, led by a group of people with
valuable homes in Charleston and on the barrier islands.
They argued that people shouldn't be penalized for soaring home values,
with high taxes based on property values rather than income.
"If you live long enough, you'd lose your house under the old system,"
said Lennaeu Siegling of Charleston, with nohometax.org.
"We really are committed to helping the homeowner with their burden,
and we're not done yet," he said. "It's such an insidious tax."
Individual savings on property taxes will vary depending on local school
tax rates, the county and municipality where a property is located, the
value of a property, and whether the owner was already receiving a partial
tax exemption known as a "homestead exemption" due to age or disability.
Most tax bills will be mailed the first or second week of October.
In Berkeley, Charleston and Dorchester counties, owners of median-priced
homes should save between $300 and $400 on their property tax bill,
compared to last year, an analysis by The Post and Courier concluded.
The median price is the point at which half the homes are worth more, and
half are worth less.
In Colleton County, where half the homeowners have properties worth less
than $70,000 and state tax relief previously covered all of the school
operating taxes, the typical homeowner will see no savings at all under
the new system, but will get the same amount of property tax relief as
before.
"Most of them aren't going to save a penny," said Billy Saunders, finance
director for the Colleton County School District. "Some will, like with
the coastal property and Edisto."
Of course, everyone in the state is paying higher sales tax now,
regardless of whether they get a property tax break.
The increase in sales tax was offset by a reduction in the sales tax on
groceries to 3 percent, and will be further offset when that tax on
groceries is eliminated Nov. 1.
For school districts, the tax shift creates a new system of funding for
education in South Carolina.
Schools will still collect property taxes to cover their debt service,
which typically pays for buildings, but instead of taxing people's homes
to fund the day-to-day operations of schools, the districts will get a
share of the statewide sales tax that's supposed to make up for the
foregone property tax.
Many school officials are worried that in the long term, payments from the
state sales tax won't make up for the property taxes that schools could
have collected.
In the short term, some small districts will benefit from a state
guarantee that they will get at least $2.5 million in sales tax money,
which in some cases is more than they would have received from the
property tax they'll be giving up.
"We think we might come out about $1 million ahead, initially," said
Saunders. "As the cap on the millage rate comes into play over the long
run, we could come out on the short end of the stick."
|
