Riley offers proposal for Property Tax reform

[vicupstate]

Riley offers plan for Property Tax reform

This sounds like a sound plan to me. Florida reassesses property annually, and limits increases in value to the rate of inflation. They don't seem to have the perpetual problems that SC does.

Keep in mind that current law already requires that local governments roll back the millage rate to offset the increase in revenues from reassessment. Although, some localities (Myrtle Beach being one) have 'gotten around' this requirement to some degree. Doing so, offsets the 51% reassessment increase used as an example in the article. If they can tighten that up and pass Riley's proposal, I think that would solve this problem without an undue burden on business or the poor.

I think this is a better solution than having nearly the highest sales taxes in the country.

Let's hope the proposal gets more consideration than it did previously in '98.

[krazeeboi]

If I was an actual homeowner, I'd probably be more interested in this. But I really do hope that true tax reform can happen relatively soon in this state.

[vicupstate]

SC must not allow tax reform to reduce it's competitiveness

Excellent guest editorial. It amazes me that more forumers don't seem to be the importance of this issue. This thread got few hits and fewer responses. Even if you rent, you still pay property taxes, and almost everyone old enough to drive has a car.

The ability for our state and it's localities to grow (ie add new skyscrapers - does that get your attention?) is closely tied to issues like this.

[krazeeboi]

Now I DID read that article and I thought it was a great read. When the connection was made to the state's economy, it definitely caught my attention. Also, living in the SC portion of the Charlotte metro area, it makes even more sense, since York and Lancaster counties have managed to lure a few companies away from Charlotte due to a lower cost of doing business and tax incentives. Tax reform needs to ensure that we do retain our competiveness, especially against our neighbors.

Speaking of which, anyone ever read Thomas Friedman's book, The Lexus and the Olive Tree? From the reviews I've read, it seems like it describes our state's current economic situation and I look forward to seeing what it has to say.

[Spartan]

First of all, it suprises me that Joe Riley would propose a sale tax increase. His idea to cap property taxes is an interesting one. I don't think that is the solution though, because appriciation is one of the major incentive to buying land.

I do wonder about education though. If we remove or reduce property taxes and rely on a sales tax set up, then the money will have to be redistributed, which may be the point... but then we rely on a less stable income source. I go back on forth on this issue, which is why I don't say much about it. I really don't know what to do. If education were improved (even though it is improving) then we would need less tax incentives to lure companies. Right now they come here becuause its cheap, but we aren't getting the companies that pay big bucks. We get Dollar General distribution centers BMW suppliesr (that don't pay as much as BMW) and the like. While these are indeed important facilities to have, low paying jobs won't sustain our economy, and the creative class/ knowledge based economy we are striving for won't get started. So what do we do? I have no idea. Maybe we should give Riley's idea a shot and see what happens.

[Charleston native]

Sorry I hadn't responded yet, vic. I've been low on time, and I didn't have enough of it to read the article. I'm going to ride the fence on this one. I think a cap on reassessment is a great idea, but it seems to me like it will still hurt low and middle income people who can't afford the property taxes, especially in my hometown. The real estate value will continue to go up for awhile, so reassessment doesn't solve the problem completely...in other words, some people will still be affected.

The sales tax options are good too, and I think they hurt low income people less because it only involves things that are purchased. However, it does affect businesses, and it doesn't give new businesses a good incentive to want to locate to the state. The bottom line is that maybe we could give Riley's option a try...I just don't know if there is a best solution.

[vicupstate]

First of all, it suprises me that Joe Riley would propose a sale tax increase. His idea to cap property taxes is an interesting one. I don't think that is the solution though, because appriciation is one of the major incentive to buying land.

Property appreciation would not be affected by this proposal. Only the increase in property taxes that RESULTS from appreciation.

For example:

I buy a house worth 100,000 in 2000. In 2005, the value has gone up to 150,000 because it became the "hot" neighborhood. However, my income has not gone up 50%.

Instead of my taxable value going up 50%, it would instead only match the rate of inflation during that 5 year period (more like 20% over that time). If I sold the house, or got a mortgage on it, the value would still be 150,000. When the home is sold for 150,000, the taxes would be based on that figure, but the new owner would know that going in.

The point of the reassessment cap it to prevent people from being taxed out of there houses because the value of there home is rising much faster than their incomes. Tying it to inflation prevents that.

The wholesale gentification in the Charleston historic district has is textbook case of the problem.

[Charleston native]

^ But, as is often the case, the residents' income doesn't increase at all. So even if the inflation goes up, some residents could still not be able to afford the taxes because their salaries didn't go up. Don't you think?

[Infinite1]

Rileys plan is much better option...i came up with a similar idea while discussing this the other day. Its a simple and elegant solution to the gentrification of appreciating areas. I still believe that some other penalty should be levied on deliquent taxpayers other than confiscating property. It is this aspect that to me makes propery taxes inherently evil and un-American.

I am not sold on sales tax replacements. I would need to see som e numbers. I am convinced that the disparity in spending between the working class and the wealthy is not as significant as the disparity in propertyvalues the two hold. For every $1000 difference in property taxes there would have to be a corresponding $50,000 diffference in spending (assuming an additional 2 cents sales tax). This number would be offset by capturing out of area spenders and those who do not own real property, but I'm not sure how much that offset is.

[vicupstate]

^ But, as is often the case, the residents' income doesn't increase at all. So even if the inflation goes up, some residents could still not be able to afford the taxes because their salaries didn't go up. Don't you think?

That would be true for minimum wage earners, but most of them don't own real estate property anyway. Most people do receive Cost of Living Adjustments in their salary. I have missed out on those myself though. Promotions also offset them. The biggest concern is the impact to so-called "fixed-income" residents. However, all government entitlements receive Cost of Living Adjustments (COLAs) every year. So as long as the taxes are tied to inflation, they shouldn't lose ground.

It is the things like prescription drugs and property taxes that significantly EXCEED the overall inflation rate, that put the squeeze on those dependent on entitlements like Social Security, etc.

[Spartan]

So this is basicly a statewide TIF program?

[vicupstate]

No, this is not a TIF. A TIF diverts increases in tax revenues (from reassessments, new construction, additons, and renovations to property inside the TIF boundaries) away from the general fund of the taxing authorities (city, county, school district) and into a separate fund. That fund then pays for a specific purpose. Those funds must be spent inside the TIF, and usually pay off bonds that pay for capital improvements, such as streetscaping, parks, parking garages, etc.

Once a set number of years elapse, or the bonds have been paid off, the TIF dissolves and ALL the taxes go to the general funds of the city/county/school district after that.

There is no 'diversion' of funds under a reassessment cap. All taxes levied continue to go to the respective general funds of the city, county and school district.

[Spartan]

I am familiar with what a TIF is... this plan sounded like the same principle.