Flying Oskar: The Property Tax Scam

When I make my decision on what to write about for this column every week, an important topic will often get passed over because some more pressing or timely issue inserts itself into the local conversation. Sometimes, if the issue that got passed over was important enough, it won’t go away. It sits there in the back of my mind, pestering me to write about it until finally, I give in and put fingers to keyboard. Such is now the case with Bob Dalton’s now nearly month-old piece in the Herald-Journal about the effect of 2006′s so-called property tax cut bill, Act 388.

In the piece, Dalton points out that far from being a tax break for most Spartanburg homeowners, Act 388 has actually increased taxes on most homes in the county. A homeowner with a home valued at $100,000—roughly the median home value in Spartanburg County—paid $889 in property taxes in 2006. That same homeowner paid $921 in 2008. Meanwhile a home valued at $1 million would’ve seen a tax cut of about $6,199 in that same time period. That means that the tax cut given to Spartanburg’s 35 homeowners with homes valued at $1 million or better is more than the total property tax bill of 235 median Spartanburg homeowners.

Act 388 has been an absolute disaster for South Carolina’s schools because the centerpiece of the bill was the much-touted tax swap that eliminated the portion of homeowner property tax associated with school funding, replacing it with a one percent sales tax increase. The idea was to shift as much of the tax burden as possible away from wealthy property owners towards middle and lower income residents.

The effort was led mostly by wealthy coastal-dwelling homeowners who were unhappy that—horror of horrors—their property taxes had been going up because of their homes’ rapidly appreciating value. One of the biggest backers of Act 388, Charleston resident Emerson Read, was given state’s highest civilian honor, the Order of the Palmetto by Governor Mark Sanford. Apparently Governor Sanford was quite impressed with Read’s tireless work fighting against the evils of property taxes on coastal McMansions and antebellum estates.

When pushing for the law, the supporters of property tax reform assured us that school funding would not suffer. They assured us that the school money lost from the property tax cut would be more than made up for by the one percent sales tax increase. Though some at the time did point out that cutting property taxes on the wealthiest South Carolinians only to shift the tax burden to middle and lower income earners was unfair, many of them were ultimately placated by an agreement to eliminate the sales tax on groceries. In the end, the bill passed overwhelmingly in both chambers of the South Carolina General Assembly and was signed into law by Governor Sanford on June 10^th of 2006.

Since then, basically everything that Act 388′s supporters have said wouldn’t happen has happened. They said that the bill provided broad-based property tax relief for all South Carolina homeowners, but as Dalton’s article points out, that clearly has not been the case. They claimed that school funding would not suffer under the bill because of the new sales tax, but school districts in South Carolina lost 1,900 employees last year. That number could soon grow higher as further cuts of four to five percent are expected according to State Superintendent of Education Jim Rex. Most of those cuts are directly related to the sharp decline in sales tax revenue that’s been experienced since the economic downturn.

What the passage of Act 388 really was about was power and influence. Those South Carolina residents with the most power and influence wanted their property taxes cut. They didn’t care that the shortfall would hurt public schools because the people living in million-dollar homes don’t send their kids to public schools. In fact, many of them are honest enough to admit that they’d rather not have to pay for public schools at all. These people don’t care that their property tax relief has caused such massive budget shortfalls or that now the burden of funding our already-anemic state government falls with a thud into the laps of an already overextended middle and working class.

Really, why would we expect them to care?

Granted, It’s disturbing that a bill so blatantly biased in favor of our most state’s well-off citizens and against everyone else could’ve passed so easily. Now as we reap what we as a state have sown in the form of a state budget crisis and rising property taxes for middle class homeowners, we have a teachable moment.

The repeal of Act 388 anytime soon is extremely unlikely, but what we can do is learn from what happened. When concerns were brought up that property tax reform was skewed towards the wealthy, the bill’s supporters countered that though while the biggest cuts would come for most expensive properties, everyone would ultimately benefit from property tax reform. That was a lie, and an intentional one at that. Those lawmakers pushing so-called reform knew very well the shape of what they were carving, but they lulled people into supporting the bill by promising them money that was never going to come.

What the reformers managed to prove was that if you promise one voter a $10 tax cut, that voter won’t likely care that you promised a neighbor down the street a $10,000 tax cut. Keep the focus on the words “tax” and “cut” and you’re golden. It’s a scam, but it’s one that South Carolinians can’t seem to stop falling for. We’d buy the Brooklyn Bridge if we were told we’d get a tax cut in the process. Act 388 is just the latest in a long line of examples of exactly that kind of thinking, and I, for one, am pretty sure it won’t be the last.