Property tax debate: Count to 10 and THINK!
By Bill Settlemyer
Executive Publisher
In recent weeks, both politicians and ordinary citizens have been in full hue and cry about the growing real estate property tax burden.
Most people expect this to be the top issue in the next session of the South Carolina General Assembly. It’s not hard to understand why, since many taxpayers in Charleston County experienced dramatic tax increases from property reassessments and a substantial increase in the budget for the county’s school system. The tax bite was felt in other counties too, though to a lesser extent.
Under the circumstances, it’s hard to ask people to calm down and take a thoughtful look at the big picture, but it’s vitally important that they do so.
The really big picture is this: South Carolina is a relatively poor state as measured by per capita income, making it more painful to levy the taxes needed to support the operations of our state and local governments.
Ironically, our state may have an advantage over more affluent states when purchasing services due to our lower wage levels in government and the private sector.
But on the other hand, there are plenty of budget items where there’s no price break at all. General Motors doesn’t give us a “poor state discount” on garbage trucks or police cars or ambulances, but we need them just the same. Nor do pharmaceutical companies and medical equipment manufacturers give us a special price break on their products when we fund our state Medicaid program. The same goes for the bricks and mortar used to build schools and the computers and other equipment in the schools.
The bottom line is that there are real needs that must be met, and in a low-wage state, even modest levels of per capita taxation can be a heavy burden for many.
Demagoguery not helpful
A few weeks ago, The Post and Courier published an op/ed piece by state representative John Graham Altman, who dished up his usual serving of demagoguery.
Asserting that local governments have raised taxes “for two reasons only—they wanted to, and they could,” Altman made a point of berating local elected leaders, most of whom put in countless hours of service to the community for little or no pay.
Sure, we may not always be satisfied with their performance, but for gosh sakes, I doubt that any of them ran for office merely to torment their constituents. This kind of “us vs. them” posturing contributes nothing constructive to the debate.
Thankfully, Mr. Altman’s op/ed piece was soon followed by another from Arthur A. (Andy) Felts, director of the Joseph P. Riley Institute for Urban Affairs and Policy Studies at the College of Charleston. Mr. Felts calmly and carefully spelled out the challenges of crafting sound tax policy for the funding of local government services, including schools.
First, he noted, it’s not entirely unfair to impose a heavier tax on people who own more valuable property. Typically, they will have higher incomes and the relative tax burden may be lighter on them than a less affluent person living in a less valuable home.
Felts pointed out that “circuit breaker legislation” could be passed to give relief to people of low or moderate income whose taxes have risen due to a rapid rise in property values in the areas where their homes are located. This would be an intelligent and targeted way of responding to one of the major “fairness” issues related to property taxation, yet it has hardly been mentioned.
Putting aside the question of the total tax burden, if we reduce taxes on high value residential properties, the tax burden must shift to lower value properties and commercial property or, as some have proposed, to higher sales taxes. But higher sales taxes or a shift of property taxes to lower-value homes adds a greater burden for those further down the economic scale, raising other questions of fairness.
Felts also warned against being too quick to substitute sales taxes for property taxes. Sales taxes will fluctuate with the state’s economy. When a recession hits and state sales taxes drop as a result, that could spell big trouble for counties, municipalities and school systems around the state. It could mean teacher layoffs and other cutbacks that would severely damage efforts to improve public education.
His final conclusion, with which I strongly agree, is that spreading the tax burden among a diverse mix of taxes is the best way to avoid an excessive burden from any particular tax. There is no magic bullet and no substitute for intelligent analysis and rational decision-making to craft the best tax policies for our state.
Finding fairness
How do we “find fairness” in the midst of this heated debate?
First, we need to look at both sides of the tax equation—we should start with realistic long-term projections about the amount and level of funding needed to provide vital government services.
A “tax debate” that focuses only on cutting taxes or shifting the tax burden from one group of taxpayers to another does not lay a proper foundation for fashioning sound tax policies for our state.
Second, we should avoid “slash and burn” constitutional amendments that would lock down state and local spending and potentially rob the state and its citizens of the ability to levy the taxes necessary to support programs that promote long-term economic growth.
And finally, major changes in the tax system should be the result of honest, open and full debate with a focus on the common good.
Here in the Charleston region, I hope that the Charleston Metro Chamber of Commerce will take a leadership role in this debate in collaboration with the other area chambers. This is the type of issue that the chamber has excelled at addressing in the past. It will be everyone’s loss if the business community does not “show up” for this critical debate and take a courageous stand that insists on fair and intelligent changes in state and local tax policy.
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