do not fix the problems brought about by the 15 percent reassessment cap in Act 388. Instead, they magnify the existing problems and shift the tax burden to owners of less rapidly appreciating property.
In 2006, the legislature passed Act 388. One provision of this legislation gives a tax exemption to anyone owning property that increases in value more than 15 percent over a five-year period. The rationalization behind this tax exemption was to ensure that current property owners were not taxed off of their property in areas of rapidly appreciating values. When the property sells (point of sale), the tax value is "trued up" to the full market value.
(as passed by Ways and Means) and S647
(as passed by Senate Finance):
- Property values will no longer be "trued up" at the time of sale. Instead, the new owner would inherit the tax exemption of the previous owner.
- At reassessment, the new owner would receive another tax exemption if the value of the property has increased more than 15 percent since the last reassessment.
Example: A property is valued at $100,000 and sells for $125,000.The new owner will inherit the exemption of the previous owner and pay taxes only on the $100,000 value at the point of sale. Then the property value is capped at 15 percent at every subsequent reassessment. If these bills pass, this new owner would never be responsible for paying taxes on the full value of his property. Owners of less rapidly appreciating property will be paying more to make up the difference.
- Confusion will still exist in the real estate market due to properties being taxed differently. At reassessment, owners of property that increases in value less than 15 percent over five years will continue to pay property taxes based on 100 percent of the value of their property. Owners of property that increases in value more than 15 percent will continue to receive a tax exemption and pay property taxes based on less than 100 percent of value.
- New construction of homes and commercial buildings will be stifled thus slowing economic recovery. The newly constructed home or commercial building will carry a taxable value of 100 percent of market value while an existing home or commercial building may carry a taxable value much less than 100 percent.
- Property owners who do not receive the tax exemption will continue to pay more taxes than if all property owners paid their property tax based on 100 percent of the value of their property. There will be less rolled back at reassessment.
- The Board of Economic Advisors estimates property tax revenues to cities, counties and schools will be slashed by $52 million the first year if these bills pass. Each subsequent year, another $52 million will be lost (this is compounded annually). Jobs and services will be cut at a time that South Carolina can least afford these cuts.
- The disparity in taxable value as a percentage of market value over time will grow even larger between properties that receive the exemption and those that don't. This will add even more confusion and disparity in the marketplace.
- Even more of the responsibility to fund schools and local government services and infrastructure will be shifted to those owning properties with slowly appreciating values - those least equipped to pay.
- Property owners are the beneficiaries of local government services - police, fire, water, sewer, infrastructure and schools. They also are the beneficiaries of amenities such as parks and revitalized commercial districts. If funding sources are slashed, the services and infrastructure now attracting new investors and tourists to our state will suffer.
For additional information, contact Melissa Carter at 803.933.1251 or email@example.com.