On Feb. 14, Mayor Joe Riley sent out an odd Valentine’s Day card to every member of the state Senate: a copy of his own property tax reform plan.
Concerned that various plans circulating in the Statehouse could have a serious effect on municipalities across the state, Riley crafted a property tax reform proposal of his own, designed to give legislators an additional way to protect homeowners from escalating property tax bills.
Legislators have been seriously debating this issue since the legislative session began in January. The House unveiled a bill that could remove 85 percent of a homeowner’s yearly property taxes — the portion that goes to pay for local public education — while the Senate would require a statewide referendum to let voters decide how property should be assessed. Both halves of the General Assembly propose raising the state’s sales tax from 5 to 7 percent to make up for any losses in property tax.
Riley hopes his proposal strikes a chord with legislators representing parts of the state where property values won’t exceed Charleston-sized values.
In the most stripped-down terms, Riley’s plan centers on limiting all property — second homes, too — from being taxed at a rate higher than standard cost of living increases over a five-year period.
Riley’s “cost of living reassessment cap” would, for example, allow a home’s 2006 taxable value to increase 16 percent more than its 2001 value, which he figures has been the rate, cumulatively, over the past half-decade in Charleston County.
For example, a family that bought a house for $100,000 in 2001 that has skyrocketed to a market value of $200,000 by 2006 — not an uncommon feat in real estate-crazy Charleston — would see the house’s taxable value increase to only $116,000.
Riley’s plan would also employ a “revenue neutral” circuit breaker, tying property value increases to millage rate decreases. While some property values would go up, corresponding tax rates would go down, keeping the property tax in equilibrium.
Riley thinks his plan would further protect homeowners by tying the tax rate to the average increase of all properties in a given county. That way, Riley says, a home that increases in value at the same rate as the county’s average would likely see little to no increase in its yearly tax bill. But, once a house is sold or improved, its actual value would become the property’s new assessed worth.
“It’s my idea, good or bad,” says the mayor, adding that past plans — like the 15-percent cap County Council lost in a court battle — shifted the burden of paying for government further onto the middle class.
Riley, who has since sent copies to all the members of the House, says his plan would allow families to adequately budget and plan for tax bills, spurring homeownership, while at the same time protecting people like Edith Corry, an elderly East Battery homeowner who paid tens of thousands of dollars for an 11,000-square-foot home that is now assessed at over $4.3 million.
Riley thinks the proposed 2-percent state sales tax increase should be tabled for a year for further study, and says it should be considered a separate issue from property tax reform.
For all the work Riley has done on the proposal, he seems to have received little to no reaction from state legislators. More than a dozen legislators, from both sides of the General Assembly, didn’t return calls for comment on Riley’s proposal.
State Rep. John Graham Altman III (R-West Ashley), reached for comment on another topic, couldn’t help but critique Riley’s plan.
“It’s nothing new,” says Altman, who is now facing serious opposition for the first time from both political parties since entering the House, with Republican Greg Hart and Democrat Leon Stavrinakis both vying for his seat. “He’s had some permeation of this for years.”
“My goal this legislative session is to take all or nearly all of property taxes off owner-occupied homes; anything that gets in the way of that, like his plan, is something I don’t want to do.”
Altman thinks that property tax reform critics, those who worry a regressive increase in the state’s sales tax would hurt the little people, are the moral equivalent of a bunch of Chicken Littles, especially since he says a House committee released a report that South Carolina has one of the highest home ownership rates in the country, thanks, in part, to “a lot of single-wides.”
“In this state, I think the sales tax increase would be regressive with a lower-case ‘r,’,” says Altman. “Taxes hurt everybody — you can’t pick and choose who it hurts … The best tax, if it exists, is one that taxes as many people as it can, and for the least amount possible. Spread it around, because there is no excuse for a single homeowner to pay $40,000 a year in real estate taxes.”
Altman hopes the House’s version of reform gets through, and thinks that it would help spur even higher home ownership rates, thereby increasing the average citizen’s concern about public upkeep issues like schools and roads.
“There’s an old saying that goes, ‘People don’t wash rental cars,'” says Altman.
But it seems Riley still has one friend left in the state House, which he left himself more than three decades ago — Rep. Bill Herbkersman, a Bluffton Republican representing Dist. 118.
Without citing specific examples, Herbkersman, a developer, finds merit in some of Riley’s proposal, saying, “he is welcome in the dialogue.”
Regardless of who likes or dislikes Riley’s approach to property tax reform, it’s one more option for lawmakers trying to balance the state’s financial responsibility while protecting their own political hides.