The 15 percent cap on property assessment increases was a key part of the 2006 law changes in South Carolina property taxation, but the cap is not a limit on taxes.
The cap restricts how much a property's taxable value, or assessment, can be increased when counties reassess every five years. The cap generally stays in place unless a property is sold.
The way reassessments and tax rates work, if every property's value rises by 15 percent, no one's tax bill should change. That's because when the value of taxable property rises through reassessment, state law requires that tax rates fall to compensate for that. It is the changes in a property's value relative to other properties in the same county that causes bills to rise or fall during reassessment.
For example, if there are only three homes in a county, and they are all worth $100,000. Then, the county reassesses and determines one home is worth $130,000, one $140,000 and one $150,000.
(Those value increases may sound unbelievable today, but that's what was happening in 2004).
Under the old rules, after tax rates drop to compensate for the higher values, the house worth $140,000 would end up with the same taxes as before, the one worth $150,000 would get a higher bill, the one worth $130,000 would get a lower bill, and the government would collect the same amount of property taxes as before.
With the 15 percent cap in place, all three houses would be valued at $115,000 after reassessment and none of their bills would change.
Now, imagine that the real estate market drops significantly, and the county reassesses again. All three homes may now be worth less than before, but as long as they are worth more than $115,000 - the capped amount - then the assessments of those properties can rise by as much as 15 percent again, as high as $132,250.
So, those taxable property values could go up because they had been artificially capped before, even as the actual value of the properties went down.
Reach David Slade at 937-5552