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Shrimp n' Grits

Latest proposals to tinker again with tax policy will surely yield more unintended consequences
Lee Walton

Over a year and a half ago, the Shrimp n’ Grits article, “Tinkering with tax policy yields unintended consequences,” expounded on the not so virtuous virtues of the 2006 Tax Reform Act. Realtors throughout the state now say the 2006 reform has stifled economic growth and pushed countless millions of dollars in out-of-state real property investments and thousands of jobs into our sister states to the north and south. Most realtors and several economic gurus throughout the state now lament that point-of-sale reassessments and owner-occupied home exemptions have dealt crushing blows to our state’s regional economic competitiveness and real estate sales, particularly the sale of commercial property that is the engine of small business job growth.

Yielding to the lobbying pressures of realtors and other special interest groups, legislators are now poised to deal a double-whammy to school boards and local governments already struggling with plunging tax revenues, lay-offs, furloughs, reduced services, and stagnant property tax bases during the worse recession in the living memory of most Americans. The latest tax tinkering and its acknowledged burden upon public schools and local governments couldn’t come at a worse time for all governmental entities throughout the state now struggling to balance budgets without deeper cuts to critical services.

David Slade’s uncharacteristically well written front page, below-the-fold article, “Legislators consider changing property tax rules” in this past Sunday’s Palter and Chatter, detailed the latest legislative efforts bouncing around the State House to mitigate the most serious unintended consequences of the 2006 Tax Reform Act. The single most prominent tool in the current tinkering would place a 15% cap on point-of-sale reassessments for all real-estate transactions and end full market value reassessment that contributed significantly to the total assessed property value of local taxing authorities. This procedure would seemingly level the playing field for nonresidential sales as well as long held, highly appreciated and more expensive residential properties. The stated goal of the currently proposed tax tinkering would be to stimulate economic competitiveness and out-of-state property investment into the state. The consequence acknowledged by sponsors of the current legislation will force school boards and local governments to raise property taxes to make up for the significant losses in point-of-sale reassessments currently generating badly needed growth in real property tax bases.

The unintended consequence of the current tax tinkering will be an increased financial drain on everyone who must share the burden of increased taxes necessary to sustain local governments and public schools. This increased tax burden will fall heaviest upon those segments of society least able to suffer their consequences, mainly small business owners and low and moderate-income housing renters. These will be the unfortunate beneficiaries of the latest tax tinkering at a time when they are most economically vulnerable to any increased financial burden. Thanks Columbia – we really needed that!

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