In 2006 the South Carolina General Assembly responded to outcry from over-taxed homeowners with a law that eliminated school funding from their property tax. Unfortunately, that’s only half the story. When lawmakers passed Act 388, they didn’t cut our overall tax burden, but expanded it by imposing higher sales taxes and additional taxes on businesses, second homes, and industrial and manufacturing properties.
Another insidious impact of that law is this: putting a higher tax burden on those other categories of property deters private capital investment and adds to an unhealthy crony-capitalism environment where a handful of powerful politicians can, and do, provide special treatment to well-connected companies.
So the question isn’t whether Act 388 should be amended, but how. As we begin that process, two facts must be kept in mind: First, state government in South Carolina takes far too much money out of the pockets of South Carolinians. Second, tax reform never benefits the people unless the overall amount of government spending decreases; simply lowering one tax while raising another – so-called “revenue-neutral” reform – is nothing but a shell game.
Some simply want Act 388 repealed. I reject that approach because it would more than double property taxes on homes, and do nothing to reduce the overall amount of money taken from individuals and spent by government. Unless the overall amount of government spending decreases, it is better to do nothing and spare people the illusion that politicians are actually doing something worthwhile.
A better approach is to impose the cap on government spending, and use money in excess of the cap to provide tax relief for owners of properties who did not benefit from Act 388.