Tax bill breaks might surprise

Some homeowners' savings could end up being less than expected

Real estate tax bills will soon be arriving in mailboxes across Berkeley, Charleston and Dorchester counties, giving local homeowners their first look at the dollars-and-cents results of property tax reform in South Carolina.

"What they can expect, and what may be upsetting to some of them, is that they might not be getting as big of a break as they are expecting," said Dorchester County Auditor Johnette Connelley.

The typical homeowner would save several hundred dollars, but might be expecting to save more.

Some state officials, and others who supported increasing the sales tax in order to reduce the property tax, have said the change would reduce the typical homeowner's property tax bill by 50 to 60 percent.

The tax shift eliminates the portion of property taxes that pay for school operations, but only for owner-occupied residences.

The statewide sales tax was increased 20 percent, to six cents on the dollar, this summer in order to pay for the property tax relief.

Gov. Mark Sanford said last year when he signed the tax legislation that it would mean "cutting the average homeowner's bill by more than 60 percent."

The fact is, the state already had a system that provided significant relief from school property taxes on up to $100,000 of a home's taxable value, so most homeowners will save less under the new system than some have suggested.

In Charleston, for example, a homeowner can expect see the property tax bill on the first $100,000 of their home's value drop by about 17 percent compared to last year.

"People with homes worth $100,000 or less were already exempt from (most) school operating taxes," said Connelley, who was president of the South Carolina Association of Auditors, Treasurers and Tax Collectors when the tax reform legislation was approved last year.

The large tax savings some homeowners will see comes from eliminating the

school tax on property worth too much to have qualified for the old version of tax relief.

The same homeowner in Charleston who will get a 17 percent tax cut on the first $100,000 of his home's value will get a 49 percent tax cut on property value above $100,000.

In other words, those who were paying the most property tax will save the most.

The owner of a $1 million home in Charleston will save about $3,400 on property taxes, while the owner of a home worth $100,000 will save around $80.

The shift from property tax to sales tax was a coup for anti-property-tax groups like nohometax.org, led by a group of people with valuable homes in Charleston and on the barrier islands.

They argued that people shouldn't be penalized for soaring home values, with high taxes based on property values rather than income.

"If you live long enough, you'd lose your house under the old system," said Lennaeu Siegling of Charleston, with nohometax.org.

"We really are committed to helping the homeowner with their burden, and we're not done yet," he said. "It's such an insidious tax."

Individual savings on property taxes will vary depending on local school tax rates, the county and municipality where a property is located, the value of a property, and whether the owner was already receiving a partial tax exemption known as a "homestead exemption" due to age or disability.

Most tax bills will be mailed the first or second week of October.

In Berkeley, Charleston and Dorchester counties, owners of median-priced homes should save between $300 and $400 on their property tax bill, compared to last year, an analysis by The Post and Courier concluded.

The median price is the point at which half the homes are worth more, and half are worth less.

In Colleton County, where half the homeowners have properties worth less than $70,000 and state tax relief previously covered all of the school operating taxes, the typical homeowner will see no savings at all under the new system, but will get the same amount of property tax relief as before.

"Most of them aren't going to save a penny," said Billy Saunders, finance director for the Colleton County School District. "Some will, like with the coastal property and Edisto."

Of course, everyone in the state is paying higher sales tax now, regardless of whether they get a property tax break.

The increase in sales tax was offset by a reduction in the sales tax on groceries to 3 percent, and will be further offset when that tax on groceries is eliminated Nov. 1.

For school districts, the tax shift creates a new system of funding for education in South Carolina.

Schools will still collect property taxes to cover their debt service, which typically pays for buildings, but instead of taxing people's homes to fund the day-to-day operations of schools, the districts will get a share of the statewide sales tax that's supposed to make up for the foregone property tax.

Many school officials are worried that in the long term, payments from the state sales tax won't make up for the property taxes that schools could have collected.

In the short term, some small districts will benefit from a state guarantee that they will get at least $2.5 million in sales tax money, which in some cases is more than they would have received from the property tax they'll be giving up.

"We think we might come out about $1 million ahead, initially," said Saunders. "As the cap on the millage rate comes into play over the long run, we could come out on the short end of the stick."

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