Growth Impact Action Committee

Property Tax Caps

The 6/6 additions are shown in blue text.

An annual property tax increase cap until a property is sold passes the costs of population growth from locals that stay in their own homes to newcomers and to those who can absorb increased taxes due to reassessment. It has the merit of being equally applicable to resale properties as well as new properties. It is not just another tax increase as some might view impact fees (which are really a tax transfer to those who require new or expanded public facilities from the rest of us). A property tax cap could apply to commercial properties as well; so businesses could better project their costs. 

Our rapid population growth, not inefficiencies or malfeasance, has been the overwhelming factor that has pushed and will continue to push taxes ever upward. Capping our tax increases, or imposing impact fees, given the limitations imposed on the latter, will not stem the need for additional revenues to serve the needs of population growth. The revenues will have to be raised by other means such as millage increases -- another reason that capping tax increases on those who remain in their own property is such a good long-term solution. Unfortunately, getting this cap is a longer battle. Impact fees (discussed on another GIAC page) can somewhat protect locals now.

As capping tax increases was the cause of much discussion in the initial GIAC forming group, this approach seems to require more words. It may require a change in the South Carolina constitution (but see the paragraph after next, starting with "South Carolina statute number 12-37-223A).  That was required when such a measure was passed in California (its 1978 Proposition 13). Proposition 13 put a cap of 2% per year or the cost of living (whichever was less) on property tax increases until a property was reassessed at the sales price when sold. Although passed by an overwhelming majority of the people (as allowed in California), it was challenged all the way to the Supreme Court of the United States that upheld it. California had a giant surplus before the Gray Davis administration took office in January 1999 -- 21 years after voters capped property taxes with Proposition 13.

For further information on California's experience with their 1978 Proposition 13 putting a cap on annual property tax increases and reassessing only when a property changed hands, click Property Tax Cap Experience and then click May and June 1998 articles.

South Carolina statute number 12-37-223A attempts to cap the increase in assessed value to 15% over 5 years (which is not the same as a cap on total property taxes) as a local option.  Charleston tried to apply this to owner occupied properties only, but a Charleston court ruled that this could not be done as a local option. 

There has yet to be a court ruling on whether the statute would hold up as a local option  if owner occupied properties are not singled out (as the statute is written).  Bill 3689 proposes the 15% level be applied state-wide to owner occupied properties specifically.  This, of course, also would have to be tested in the courts.  Bill 3689 does not address the issue of whether or not a 15% valuation cap on properties other than owner occupied could be applied at the state level as opposed to as a local option.

Bill 4271 proposes that owner occupied home revaluation be ceased entirely until a property is actually sold and then to revalue it the next year at its sale price.  It also limits millage increases to the increase in the cost-of-living.  It does not put an absolute maximum percentage on annual tax increases.

Both Bill 3689 and a similar Bill 4271 passed overwhelmingly in the S.C. House.  The senate raised the revaluation limit in Bill 3689 to 20%; then the revised bill was enacted in joint committee shortly before the close of the legislative session on June 3.

Editorial comment: Even the IRS never taxed appreciation in the value of a home before it sold.  The passage of Bill 3689 is a step in the right direction, but it makes no more sense to tax the appreciation of a home than to tax the appreciation of value of food stored in a home freezer.  Hopefully, S.C. will eventually cease taxing appreciation of homes entirely, except for their reassessment when sold.

If you wish, click here to view Bill 3689 in its entirety and click here to view Bill 4271 in its entirety. Note: There have been instances in which an angelfire (our Web host) ad has totally covered off-site links such as this; simply clicking the "x" in the upper right hand corner of the page has removed the ad so you can see the site itself..  Angelfire provides free web hosting on the condition that their ads are allowed on the site.  I have no particular problem with ads in general but I do and have complained, without effect, about totally covering other web site pages linked to by GIAC...

As I feel bill are confusing as written, the following excerpt from my email to the Bill 3689 sponsor, Vida Miller, may help your interpretation  --

"The mystery is solved.  The idea is that sections 12-57-223 and 12-57-223A will simultaneously exist should bill 3689 pass.  It would have been less confusing if [legislative counsel]  had not chosen the same statute number as one that has been repealed.  But 12-57-223 will be a new statute, written as shown in the bill.

"[Legislative counsel] says 223A is the existing statute (which checks).  If Bill 3689 passes, the net result would be that owner-occupied residential property would (by 223) have the 15% valuation cap placed on it statewide, while 223A, with the amendments shown, would apply, as now, to all other properties to the extent that its local option provisions withstand judicial review.."

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