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Wednesday, February 01, 2006 - Last Updated: 8:18 AM
Tax relief measure heads to full House
Plan would eliminate most taxes on homes
BY JOHN FRANK
The Post and Courier
COLUMBIA - With one eye on the 2006 elections and the other on rising
property taxes, a House committee approved a comprehensive relief package
Tuesday that would eliminate the bulk of homeowners' tax bills.
State lawmakers said the Ways and Means Committee's 20-3 vote sends a
powerful statement to constituents whose tax bills went through the roof
during the latest reassessments.
'I think we are sending a message that people will actually own their
homes instead of renting them,' said committee Chairman Dan Cooper,
R-Piedmont.
The House plan would eliminate about 85 percent of property taxes on
owner-occupied homes - all local taxes except bonded indebtedness - in
exchange for a 2-cent sales tax increase.
The proposal also:
-- Eliminates all state taxes on groceries.
-- Caps local governments' ability to raise taxes on other types of
property to the consumer price index plus population growth. (A higher tax
increase must be approved by 75 percent of the local governing body.)
-- Closes a loophole that allows school districts to borrow money through
alternative financing plans.
The second part of the tax relief package would ask voters in November to
decide whether to move to a 'point of sale' reassessment system that
revalues property only when it is sold or significantly improved.
The property tax package now goes to the full House, which is expected to
take up the measure next week. Based on the discussion during committee, the
debate on the House floor is likely to feature dramatic political
pyrotechnics. 'That's where the real knock-down, drag-out fights are going
to be,' Cooper said.
Even more, the House's effort could prove futile because key senators
have indicated that the hallmark provision in the House's plan - a billion
dollar tax-swap - has little chance of passing this year.
House committee members debated the two pieces of legislation for more
than three hours Tuesday and made only small changes despite numerous
attempts from opponents and supporters.
Even leading Democrats who were concerned about equity issues backed
down, accepting the political reality of the situation and vowing to
continue the fight on the House floor. 'I wasn't going to get in front of
that train,' said Rep. Harry Ott, the House Minority leader. 'I don't think
there was any doubt this was going to pass ... and nothing said here today
would have changed that.'
The St. Matthews Democrat and other lawmakers were concerned about how
the new sales tax money would be distributed as the state takes over more
funding of local governments and school districts. They worry the money
won't be doled out evenly, consequently locking in current inequities in
school subsidies.
School districts would be funded at their current levels for the first
year, but in subsequent years, the money would be distributed on a
weighted-pupil basis similar to the current Education Finance Act funding
formula.
This method of distribution could be troublesome for Charleston County
schools, which saw an unexpected $7.5 million decrease in state funding last
year.
The bill's supporters say the impact on schools would be minimal because
the new sales tax revenue makes up only one-eighth of a district's overall
budget. Also, a provision in the bill ensures that state support doesn't
fall below 40 percent.
Still, some wealthier school districts could lose money.
'It's just a cross we have to bear on the coast,' said Rep. Chip
Limehouse, R-Charleston. 'We are deeply concerned, but the more important
issue is property tax relief for homeowners.'
Even if House members strike a middle ground on the distribution issue,
the Senate still sees the property tax problem differently.
Senators have proposed spreading the property tax relief to more areas,
such as rental units and cars. Also, they would give local governments more
flexibility in restructuring the reassessment system.
Leading senators worry that the House's plan to nearly eliminate home
taxes is too ambitious.
'It would be nice if there's a (tax) substitution ... but the culprit is
reassessment, said Sen. David Thomas, R-Greenville, who originally pitched a
House-type plan but recently backed off. 'The bottom line is we can live
where we are, but we can't live with reassessment continuing where it's
been.
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