Caps to bring biggest property tax changes

People buying homes in future will face double whammy

This year brought large changes in the way South Carolinians are taxed to pay for public schools, but there's more to come.

In 2007 the statewide sales tax went up to 6 percent and the property tax on owner-occupied homes that paid for the operation of schools was eliminated.

Next year, there's expected to be an additional property tax cut for homeowners, in county and municipal taxes, because the state's higher sales tax raised more money than needed to reimburse schools for the forgone property tax money.

But the really big property tax changes will come from the reassessment cap that voters approved with a constitutional referendum, and new caps on property tax increases.

The limit on tax increases bars local and county governments, and school districts, from raising their property tax rates more than allowed by a formula based on consumer price inflation and population growth.

However, governing bodies can exceed the caps for specific purposes ranging such as the need to cover a budget shortfall from the previous year, responding to a natural disaster, or paying for unfunded state or federal mandates.

While the tax limits aim to keep a lid on tax rates, the assessment cap will dramatically shift property taxation in the coming years from longtime property owners to property owners who recently moved or relocated.

The new rules say that when there's a reassessment, which typically happens every five years, the taxable value of a property can't be increased by more than 15 percent unless it was sold or substantially improved.

Reassessment is the process in which counties recalculate how much properties are worth for the purpose of taxing them.

The cap means that if someone owns a home currently worth $200,000 for tax purposes, and five years from now it's worth $300,000 and there's a reassessment, the cap would limit that home's taxable value to $230,000, as long as the same person still owns it. However, if the home were sold, it would be taxed on its full $300,000 value.

Putting limits on the taxable value of some property also means there will be less property value to tax, so tax rates would have to rise more than they would have without caps to produce the same amount of revenue. For those who buy property years in the future, it's a double whammy.

For those who own property and keep it for a long time, the limits on assessments and tax rates would eliminate much of the uncertainty about property taxes, which under the old system could soar during a reassessment, or due to large tax rate increases.

The state Board of Economic Advisors has estimated the tax cap would redistribute $372 million in property tax over the next five years, mostly to properties reassessed at higher values when they are sold.

Reach David Slade at 937-5552 or dslade@postandcourier.com.