Panel's plan would cut property taxes

COLUMBIA - A special House committee studying property tax relief put the finishing touches on a proposal that would cut nearly all property taxes on owner-occupied homes by raising sales taxes two pennies on the dollar. With the core of the proposal agreed to a month ago, members mainly discussed details at an occasionally contentious meeting Wednesday. Only local government debt would appear on property tax bills for homes that are the owner's primary residence. The House proposal would raise the state sales tax by 2 percentage points to 7 percent, but it would also eliminate the sales tax on food. A bill incorporating the proposal is currently being worked up and should be ready for lawmakers around the time the General Assembly convenes in January. Property tax relief has been a hot topic this year. The Senate is working on its own proposal that includes raising the sales tax. The Senate's property tax relief isn't as deep - it would only cover school operating expenses - but taxes would be cut on vehicles and some rental homes as well as owner- occupied homes. Renters would be eligible for a tax refund. The main disagreement during Wednesday's special House committee meeting was how to distribute the new sales tax revenue to the counties to make up for the lost property tax revenue. The committee agreed in the first year of the tax shift to fund local governments at the same level as before, with up to a 6 percent increase depending on population growth and other factors. In later years, the committee hopes lawmakers will pass a formula to determine how much sales tax revenue each government gets. Increasing the sales tax 2 percent would generate an extra $1.2 billion, while the property tax plan would cost $700 million. But homeowners would not be completely off the hook. They will still have to pay about $112 million in annual borrowing costs tied to bonds school boards, counties and cities. Service fees, such as garbage pickup, also would be on tax bills. The proposal also would freeze all property assessments at current levels until the property is sold or substantially approved. House Speaker Bobby Harrell spoke briefly at the meeting, reminding the committee members he wanted almost all property taxes taken off owner-occupied houses so the issue wouldn't come up again in 10 years or so. "If you don't completely eliminate a tax, it's going to come back," said Harrell, R-Charleston.

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