Starting this fall, homeowners will no longer pay property taxes to operate schools, which makes up 50 percent to 60 percent of the average tax bill.
Instead, additional sales tax will pay the roughly $500 million needed for school operating taxes. Those savings won't appear until next year, when tax bills are sent out in fall 2008.
The state's top economist, Bill Gillespie, said South Carolina will collect more sales tax revenue than needed to pay the school taxes.
By law, the additional money will take about 20 percent off county and city property taxes.
"That is great news. (But) we're not out of the woods if the economy were to peak out on us," said state Sen. Larry Martin, R-Pickens, a skeptical supporter of the property tax relief plan.
The extra sales tax revenue also means the sales tax increase should be able to pay for school operating taxes for the next few years.
School districts and local governments that opposed the tax swap worried that the growing cost of education might lead to budget cuts because the law caps their ability to approve tax increases.
But Mr. Martin said the sales tax surplus should give lawmakers a few years to see how the property tax relief plan works and make adjustments.
Proponents of the tax swap, including Emerson Read, of NoHomeTax.org, said they will be back in Columbia next year to try to get all home taxes eliminated for senior citizens and the disabled, in addition to tax cuts on other properties such as rental property, second homes or businesses.
"The taxes are still too high in many cases," Mr. Read said.