S.C. homeowners to get big tax cut
Residents soon won't pay for school operations because of sales tax boost

WHAT THE TAX SWAP MEANS TO YOU

A recent study by the Strom Thurmond Institute at Clemson University analyzed how the tax swap a 1-cent-a-dollar increase in the state's sales tax to pay for property tax relief on owner-occupied homes would affect homeowners and renters. Here's what the study concluded:

Most homeowners will pay less in taxes. The increase in the amount of sales tax for most homeowners will be less than the property tax relief they'll get.

All renters will pay more in taxes. Rental housing does not qualify for property tax relief under the bill. But everyone, renters included, will pay more in sales taxes.

Homeowners in school districts with higher property tax rates will receive more tax relief than those with lower tax rates.

Homeowners with modest incomes and modest homes will benefit less than homeowners with higher incomes and more expensive homes.

S.C. residents likely will get a larger-than-expected cut to their home's tax bills "possibly totaling $88 million" according to state economists.

Beginning this fall, homeowners will no longer pay for school operating taxes for the home in which they live, typically 50 percent to 60 percent of their property tax bill. Statewide, school operating taxes total $500 million.

The additional windfall, the result of a 20 percent increase to the state sales tax this year, means homeowners will not pay about a fifth of their county and city property taxes as well.

However, those savings won't appear until next year, when tax bills are sent out in fall 2008.

The Board of Economic Advisors said two weeks ago that a recession could loom in South Carolina's near future. But Bill Gillespie, the state's top economist, said sales tax revenues should continue to grow despite that possibility.

Historically, Gillespie said, the sales tax has grown about 5.5 percent a year. Slower growth could cut into the amount of sales tax money available to pay property taxes, he said, but the sales tax surplus still would be at least $70 million, based on current data.

According to state projections, residents will pay a total of $372.9 million in city and county property taxes in 2007. After paying homeowners school taxes, any sales tax revenues left over from the additional penny sales tax would help pay city and county bills.

The windfall also likely means the state will collect enough money from the increased sales tax to pay in full the growing cost of homeowners school operating taxes for the next few years.

The money raised by the penny-a-dollar increase in the state's sales tax is placed in a separate account. It can only be used to pay homeowners property tax bills.

"That is great news,"� said state Sen. Larry Martin, R-Pickens, a skeptical supporter of the property tax relief plan. "(But) we're not out of the woods if the economy were to peak out on us."

Martin said the sales tax surplus gives lawmakers a chance to see how well the new property tax relief plan is working and make adjustments. Historically, Martin said, school taxes have increased faster than state tax revenues have grown.

School districts and local government also are worried the growing cost of education and services might lead to future budget cuts, because their ability to approve tax increases is capped by the new law. However, Martin said a surplus would give lawmakers a chance to address those concerns, if needed.

Emerson Read, whose NoHomeTax.org group helped lead the charge for tax relief last year, said the surplus is good news. But Read still wants all home taxes eliminated.

In addition, Read said, the property tax relief law did nothing to address years of overtaxing or taxes on other properties, including rental property, second homes or businesses.

Read said his group likely will propose eliminating taxes on the homes of senior citizens and the disabled next year.

"I feel very sorry for (them)"� Read said. "The taxes are still too high in many cases."� Reach O'Connor at (803) 771-8358.

By JOHN O'CONNOR - joconnor@thestate.com