April 19, 2006

South Carolina: How Not to Inform a Tax Debate

The easiest-- and worst-- thing you can do to debase a public discussion on tax policy issues is to correctly identify a legitimate problem with a tax, and then incorrectly identify complete repeal of that tax as the only possible solution. It's happened with the federal estate tax in a long, slow battle over the last decade. Supporters of a national sales tax have made this approach a mantra. And it's happening with the property tax in South Carolina right now.

South Carolina lawmakers have been been arguing about property tax reform options for much of 2006-- and with good reason. Home values are shooting up in certain parts of the state, especially coastal areas, and since South Carolina does not currently have any property tax relief measures that protect homeowners from rapid growth in property taxes, that's a real concern.

But a group called "No Home Tax" apparently thinks the only possible solution to this problem is to completely eliminate homeowner property taxes. Their latest contribution to the state's tax debate is this radio ad, which started airing earlier this week:

Sound effects: Murmurs of a press conference beginning.
Senator: OK, OK, people. Let's get this party started. First question. Go ahead now.
Female reporter: Senator, we're being told that the taxpayers of South Carolina are being financially devastated by their skyrocketing property taxes. Your thoughts?
Senator: It couldn't be that bad, could it? I haven't heard from the voters. Besides heh, heh the government needs the money, don't it honey?
Male reporter: Senator, how do you respond to working class folks who say they are going to have to sell their home because they can't afford the yearly increases?
Senator: Well, unless the voters scream bloody murder, or vote me out, this is a dead issue. I'll need to get calls, letters, e-mails and personal visits from the public before I change my stance. The people can speak up or pay up.
Female reporter: Senator, are you even listening to the voters?
Senator: It's kind of hard to when you're up to your ears in special interest money. Hey, now, wait, now hold on, don't print that.
Announcer: If you want property taxes eliminated, you must contact your state legislator today. For information, go to NoHomeTax.org. That's NoHomeTax.org. If we fight together, we'll win. Paid for by NoHomeTax.org, Emerson Read, chairman.

You can listen to it here.

In surveys, property taxes regularly rank among the least popular ways of raising revenue. And there are good historical reasons for this:
  • poor administration;

  • a disproportionate impact on the poor;

  • arbitrary "tax cap" rules that discriminate between otherwise identical homeowners based on how long they've owned their homes;

  • the lack of a linkage between your tax bill and your ability to pay it, which can lead to tax hikes on the fixed-income seniors who can afford it least.
But none of these problems-- NONE of them-- are inherent in the tax. They can all be at least partially resolved through a variety of sensible reforms that have been enacted in many states. The South Carolina homeowners who are most threatened by the current rise in home values would be very well served by implementation of these reforms. But you wouldn't know that from the fine folks at "No Home Tax," who think the only solution is complete repeal of the homeowner property tax.

Repealing a tax is certainly a simple solution to any complicated tax policy problem. But, as South Carolina Senator Larry Grooms noted last week, "I like simple. I love simple. But when simple won't work, you can't have simple."


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