Tax cap to give wealthy a break

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AIKEN - Voters saw "tax cap" and went for it, approving a referendum last year that promised a break on property taxes.

Only now, as county officials wrangle with next year's budget, are the unintended consequences becoming painfully clear: Only the richer residents will truly benefit from the tax cap.

The people with homes worth hundreds of thousands of dollars will save significantly on their property taxes, county officials say.

But the people who live in moderate homes could end up paying more than they would have had the cap never passed.

That means they'll likely end up bearing more of the tax burden.

"When you see something on the ballot that says we're going to cap your taxes, you're going to vote for it," said County Administrator Clay Killian, who's trying to finalize a budget complicated by the referendum.

Because of that vote last year, Mr. Killian doesn't know yet whether property taxes will need to be raised to cover county expenses.

Vicki Simons, of the Aiken County Taxpayers Association, said voters didn't understand what they were approving.

She said it's actually a "reverse tax" and likened its effects to a water bed.

"When you press down on one side, somewhere else has to go up," she said.

Overwhelmingly approved by voters last fall, the referendum made it so taxable property values cannot go up more than 15 percent.

Efforts to pass the cap began because some South Carolina homeowners were receiving sticker shock every five years as the value of their homes - and their tax bills - drastically increased. Some homeowners were being virtually taxed out of homes that had been in their families for generations.

County officials worried last year that the referendum might backfire, and now it's stalled efforts to set the 2007-08 budget.

Property taxes make up nearly half of the general fund, which pays for services provided by the sheriff's office and EMS, among other things.

County assessor Mike Reed said that before the cap, property reassessments every five years would redistribute the tax burden equitably - meaning that if your property value dropped or stayed the same, generally so did your taxes.

If your home's value increased significantly, your tax bill went up accordingly. That allowed poorer homeowners' tax bills to drop while still giving the county the same amount of money to operate its budget.

The cap changes that.

Mr. Reed offered an exaggerated example to illustrate the impact of the cap:

Under the old taxing system, a $35,000 home that doesn't increase in value would pay $99 in taxes. If the tax cap hadn't been approved, that homeowner's taxes would actually drop to $77 this year.

But because of the cap, it will only drop to $86.

By comparison, a home purchased for $230,000 in 2005 would have a tax bill of $653.

But when the value of the home skyrockets to $1.5 million, the bill doesn't do the same. Instead of paying $3,284, that homeowner's property taxes stay the same.

In a nutshell, Mr. Reed said, taxes that should drop don't, and those that should go up don't.

"That thousands of dollars is going to be picked up by the property owners whose value don't go up that much," Mr. Reed said.

Hurting the poorer homeowners isn't the only unintended consequence of the tax cap.

Mr. Reed said some residents who buy a home will receive a shock when they get their first property tax bill, because it might not be what the previous owner was paying.

The tax cap applies only to current owners, Mr. Reed said. Someone who owns a house worth $300,000 could be paying taxes on half that because of the cap. But if they sell the home for what it's actually worth, the new owners must pay taxes based on what the house is actually worth - and it's at that point where their taxes are capped.

That could be double or triple the taxes, based on Mr. Reed's example.

The implications are far-reaching, opponents say.

"We will not feel the effect of this for some time," Ms. Simons predicted.

Reach Sandi Martin at (803) 648-1395, ext. 111, or sandi.martin@augustachroni

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naugliberal 05/29/07 - 06:29 am
And you thought that the

And you thought that the people writing the tax laws didn't know what they were doing!

Spurs07 05/29/07 - 08:32 am
Just another example of the

Just another example of the rich getting richer and the poor getting poorer

The Knave
The Knave 05/29/07 - 10:26 am
This is another example of

This is another example of the stupidity and cupidity of the South Carolina legislators. They love to shift the tax burden from the wealthy to the poor. Two other examples: (1) They voted last year to reduce property taxes and increase sales taxes. Guess who benefits? -- the guy with a $10 million place on the Battery in Charleston. Guess who suffers? -- the guy who lives in a $300 per month apartment and spends most of his income on the essentials of life. A long-standing terribly regressive tax is the sales tax on automobiles. It is a 5% tax, capped at $300. Therefore, the person buying a $6000 flivver pays a 5% tax. The person who buys the $60,000 Lexus pays a 0.5% tax. You can be sure that the good ole boys are making sure that the good ole boys are well taken care of.

Many Arrows
Many Arrows 05/29/07 - 11:13 am
"Vicki Simons, of the Aiken

"Vicki Simons, of the Aiken County Taxpayers Association, said voters didn't understand what they were approving."

This is like the so-called "FAIR" tax that so many in Georgia and Carolina are actually DEMANDING. What they don't realize is that it was funded by corporations, who get a $trilllion tax FORGIVENESS, while common folks have to pay a 34% tax on essentials like utilities, municipal water, fire protection, and health care.If it were to pass we would see much wailing like that of Ms. Simmons. Beware of Greeks bearing gifts!

jdcooper 05/29/07 - 03:03 pm
Well, what do ya expect when

Well, what do ya expect when the Republican leaders have their hand in things. They have always been for the rich and the ignorant poor.

Carleton Duvall
Carleton Duvall 05/29/07 - 03:51 pm
manny arrows, you need to

manny arrows, you need to read the fair tax proposal. You do not know what you are talking about.

Little Lamb
Little Lamb 05/29/07 - 08:04 pm
In Augusta we try a sneakier

In Augusta we try a sneakier approach. We are about to give tax relief to property owners in Hyde Park because they have screamed and hollered at public meetings demanding to be "relocated." Well, guess what. One of the major property owners is the well-heeled Charles Utley. Of course he doesn't live in Hyde Park. He's a slumlord. He will get the tax breaks and the common ordinary homeowner living outside Hyde Park (read that, anywhere else in Richmond County) will have his/her property tax make up the difference.

Many Arrows
Many Arrows 05/29/07 - 11:31 pm
Scooby - I have 20++ years

Scooby - I have 20++ years sales tax accounting for 9 Fortune 500 companies, during which I saved them $10's of millions in sales taxes from my research. Wanna bet that I have not read the 'Book', the fairtax site, and the WHOLE Bill? Bluntly put, it is a con job on y'all, but I intend to laugh at your whining faces after it passes all the way to the bank. It is EXACTLY the same deal as this article on how people were fooled into paying more, so the wealthy and powerful pay less.

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