Overview

The South Carolina House Tax Policy Review Committee held its sixth meeting on Tuesday, November 15th, to discuss property tax and sales tax exemption issues.  Committee Chairman Tommy Pope (R-York) began the meeting with a brief review of previous topics discussed by the Committee before the presentation of new data.  The Committee made no decisions during the meeting on the issues and determined that further information is needed. 

Property Taxes

Tom Cone, legal counsel for the Committee, began the discussion with a presentation regarding hypothetical scenarios on ways to reduce commercial and manufacturing property assessment ratios.  The scenarios presented to the Committee are as follows:

Scenario 1

Decrease the assessment ratio on Commercial/Rental Property from 6% to 4% (-33%).

This would result in a decrease of $489 million in statewide property tax revenue from the commercial/rental property sector.

In order to maintain the current revenue stream from property tax, extra millage would need to be imposed on the other property tax categories.

The results (using 2014 estimates) would be:

• an increase of $168 million in revenue from Owner Occupied;
• an increase of $7 million in revenue from Agriculture;
• an increase of $122 million in revenue from Motor Vehicles;
• an increase of $18 million in revenue from Other Personal Property (ex: Aviation/Boats);
• an increase of $45 million in revenue from Manufacturing;
• an increase of $83 million in revenue from Utilities;
• an increase of $43 million in revenue from Business Personal Property (ex: Furniture); and
• an increase of $3 million in revenue from Motor Carriers.

Scenario 2

Decrease the assessment ratio on Manufacturing and Utility Property from 10.5% to 6%.

This would result in a net decrease of $314 million in statewide property tax revenue from the manufacturing ($111 million) and utility ($203 million) sectors.

In order to maintain the current revenue stream from property tax, the effect of extra millage on all other classes would be:

• an increase of $69 million in revenue from Owner Occupied;
• an increase of $155 million in revenue from Commercial/Rental;
• an increase of $5 million in revenue from Agriculture;
• an increase of $57 million in revenue from Motor Vehicles;
• an increase of $6 million in revenue from Other Personal Property;
• an increase of $20 million in revenue from Business Personal Property; and
• an increase of $2 million in revenue from Motor Carriers.

Scenario 3

Decrease the assessment ratio on both Commercial/Rental Property (from 6% to 4%) and Manufacturing and Utility Property (from 10.5% to 6%) at the same time.

This would result in a net tax savings to these property classes of approximately $569 million including:

• a decrease of $345 million in revenue from Commercial/Rental;
• a decrease of $80 million in revenue from Manufacturing; and
• a decrease of $144 million in revenue from Utilities.

In order to maintain the current revenue stream from property tax, the effect of extra millage on all other classes would be:

• an increase of $254 million in revenue from Owner Occupied;
• an increase of $14 million in revenue from Agriculture;
• an increase of $199 million in revenue from Motor Vehicles;
• an increase of $26 million in revenue from Other Personal Property;
• an increase of $70 million in revenue from Business Personal Property; and
• an increase of $5 million in revenue from Motor Carriers.

Following Mr. Cone’s presentation, members of the Committee expressed concern regarding the increase in millage on owner occupied property.  Members also requested more information regarding the data, including the possibility of additional revenue dollars as a result of attracting new industry to the State due to the decrease in manufacturing and commercial assessment ratios. 

Sales Tax Exemptions

Due to time constraints, the Committee heard a brief presentation on sales tax exemptions from staff-analyst Don Hottel.  Mr. Hottel gave the Committee a document listing all the sales tax exemptions currently in place across South Carolina.  Rep. Anne Thayer (R-Anderson) and Rep. Joe Daning (R-Berkeley) made a request to Chairman Pope for a more detailed explanation regarding the current exemptions.  Rep. Shannon Erickson (R-Beaufort) echoed their comments and suggested an opportunity for the public to address sales tax exemptions.  Chairman Pope agreed to allow public input to be submitted to the Committee which will be discussed at the next meeting. 

Next Meeting

The next meeting of the Committee will be held on Tuesday, November 30th.  In addition to further discussion on property tax and sales tax exemptions, the Committee plans to discuss income tax issues as well as proposals involving business license fees.  This will be the last meeting before the 2017 legislative session begins.  Meetings of the Committee will continue after the session commences.  Chairman Pope and members of the Committee expressed their belief that the issues presented are too important to rush through.  Additionally, several members of the Committee expressed an interest in the creation of a permanent standing committee to study tax and revenue issues.