House subcommittee passes point-of-sale repeal
From Brent Edgerton, New Way Properties: Interesting debate on Point of Sale Tax Reassessment…opposition seems to be gaining ground.:
By James T. Hammond
jhammond@scbiznews.com
Published March 9, 2011
The chairman of a House subcommittee declared Tuesday that the General Assembly did a poor job crafting the now-infamous Act 388, which aimed to relieve home-owners of taxes for public school operations and shifted that tax burden to sales and use taxes instead.
Rep. Liston Barfield, R-Conway, had presided over two days of passionate and contentious debate about the bill, specifically about legislation (House bill 3713) that would repeal a provision of Act 388 that requires the taxable value of all real estate be reset when a property is sold.
“After several hours of debate, all that we concluded was that Act 388 was bad,” Barfield said.
The so-called point-of-sale provision is widely disliked by the real estate industry, which blames the reset provision for slumping real estate transactions.
But cities and towns, represented by the South Carolina Municipal Association, defended the point-of-sale provision as necessary to ensure their revenues keep pace with the cost of providing services.
“This legislation (which would repeal the point-of-sale reset on property values) could be titled the anti-firefighter, anti-policeman and anti-school teacher act of 2011,” said Charleston Mayor Joe Riley, reciting the association’s estimate that cities and towns would lose $260 million in tax revenue if the point-of-sale provision is repealed.
The repeal provision would “create an exception to taxes,” Riley said, and put a heavier burden on stable middle-class communities, while creating a windfall tax break for wealthier communities where property values are rising at a rapid rate.
“In time, the middle class neighborhoods will always be taxed at 100%, while wealthy homeowners will have substantial exemptions,” Riley said. “You’ll see a $2 million home taxed at $500,000 of its value, while a $200,000 house will always be taxed at 100% of its value.
“That’s very bad public policy,” Riley said. “This legislation deserves a quick trip to the waste basket.”
The majority of the subcommittee was unmoved, and approved the bill on a 3-2 voice vote. The provision now goes to the House Ways and Means Committee for consideration.
Rep. James Merrill, R-Charleston, defended the repeal of the point-of-sale value reset, arguing that local governments do not deserve the “windfall” he says they continue to realize from rising property values.
“The property tax is the most insidious tax of all,” Merrill said, adding that the first things an oppressive government does it erode citizens right to bear arms, then takes their property.
“I do not understand why governments think their revenue should stay the same when the people who pay the taxes have seen their revenue go down,” Merrill said.
Merrill said the perceived inequity is in part local government’s own creation, stemming from counties’ failure to conduct regular comprehensive reassessments of real estate values.
“Charleston is going on eight years without a reassessment,” Merrill said, attacking the notion that taxpayers getting a tax break is a windfall.
“Government can get a windfall, but taxpayers getting their money back is not a windfall,” Merrill said. “Government wants to keep point-of-sale revaluation because in the short term they are getting a lot of money.”
Rep. B.R. Skelton, R-Pickens, voted against repeal of the point-of-sale provision, and noted that he had also opposed Act 388 when it was approved in 2006. A licensed real estate broker himself, Skelton blamed the depressed real estate market on widespread collusion between banking and real estate interests to approve mortgage loans for people who could not afford them.
“What’s really going to solve this problem is when the economy gets going again,” Skelton said.
Nick Kremydas, CEO of S.C. Association of Realtors, told the panel that point-of-sale re-evaluations are pushing up property taxes on commercial real estate to a point where some businesses are suspending investments in new stores in South Carolina.
But Skelton countered Kremydas’ statement, saying, “It’s amazing to me that I’m seeing all these Walgreens, CVS and Rite Aid stores going up.
“We’ve been doing ad hoc tax policy based upon who is seeking the advantage,” Skelton said. “Point-of-sale simply restores some of the equity from the transfer of the tax burden to sales taxes.”
West Columbia Mayor Bobby Horton said the problem is much greater than simply repealing the point-of-sale provision. Attempts to address voter anger over rising property taxes have so fouled up the equity in the tax system that the General Assembly needs to start over from scratch.
“I’d like to see us go back to the system we had before Act 388,” Horton said. “I think all property should be taxed at what it’s worth.
“What I’d really like to see is for the General Assembly to take off the restrictions and allow cities to levy taxes as they see fit. We don’t have true home rule as was intended. Act 388 was a band aid that has caused a lot more problems than it solved.”
Leave a Reply
You must be logged in to post a comment.