June 14, 2006

South Carolina - Compromise a Mixed Bag

South Carolina legislators finally decided on a property/sales tax swap compromise. Legislators came to an agreement that capped assessment increases, raised the sales tax rate, and lowered the sales tax on groceries. The legislation is a fine example of how sometimes our political system can foster compromise. But I'm left wondering if legislators missed the mark by not doing more for those with the least.

Here are a few more details about the legislation:

This fall a constitutional amendment will go before voters which, if passed, will limit property tax assessments from growing more than 15% over five years. Historically these type of assessment caps have been very expensive and help mostly those with the most ability to pay. To take a deeper look about why capping assessed value growth isn't necessarily the most fair property tax reform mechanism click here to read a policy brief about this very topic.

Secondly, the legislation increases the sales tax rate from 5 to 6 percent. Some of the revenue generated from this tax increase will go to offset homeowner property tax bills. On its face this seems like a defensible policy. However, this legislation does nothing to help renters and the regressive sales tax increase does no favors for low and middle-income families.

The final component of this compromise is that the sales tax on groceries was reduced from 5 to 3 percent. Lowering the sales tax on food is an admirable step, yet it's quite costly and poorly targeted. If lawmakers were concerned with making the tax system more fair for everyone they had a myriad of other options available including a sales tax credit. For more about progressive options for sales tax relief click here.

Some South Carolinians aren't pleased with this legislation for one critique, click here. This legislation certainly isn't ideal and depending on where you're sitting compromises never make anyone 100% happy. But while this legislation certainly isn't ideal, the compromise is better than many alternatives legislators initially discussed.

But perhaps there's some hope that the next time tax reform is discussed legislators will do more for working families.

Parts of this post were originally published in CTJ's Tax Digest, a weekly email that highlights state and federal tax trends across the country. If you'd like to subscribe to the digest send an email to: ctj@ctj.org


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