A South Carolina House panel on Tuesday advanced a pair of bills that would cut the tax rates on manufacturing and commercial properties.
The bill would lower manufacturing property taxes from 10.5 percent to 6 percent over a four-year period. Republicans say the current rate is one of the highest in the country and is uncompetitive. Rep. Tommy Stringer (R-Greer) said more than half of all manufacturers in South Carolina do not even pay the full rate. Instead most companies that have relocated to the state over the past few decades make agreements with local governments to pay a fee-in-lieu arrangement that falls below 10.5 percent.
“(It’s) really inherently unfair to those older companies that are still at 10.5 percent,” Stringer told the Ways and Means subcommittee, “So that was an obvious area of concern for us.”
A companion bill that the panel also passed would lower the commercial and rental property rate from 6 percent to 5 percent over the next eight years. In all, there are seven total bills that are part of a House GOP tax reform package.
In all, state budget analysts predict municipal and county governments will eventually miss out on more than $1 billion in tax revenue per year between the two proposals, on top of lower-than-normal state funding.
Democrats attacked the plan. “It’s pretty easy for us to sit up here and say we want to reduce taxes when we don’t have any skin in the game,” said Rep. Harry Ott (D-St. Matthews)
Robert Croom, deputy general counsel of the South Carolina Association of Counties, was more blunt, “This will increase your taxes on your home.” He said a government’s debt payments are based on its taxing power, so a sudden drop in revenue from manufacturing and commercial property would lead to an increase in the rates for owner-occupied homes.
Croom also said local governments often use the fee-in-lieu arrangements to help install water lines, sewer lines, and roads for a new plant. With the new lower rate, there’s no incentive for a fee-in-lieu, and counties will struggle to pay for that additional infrastructure, he added.
However, Stringer said local governments would see gains in the long term when more businesses are attracted by the lower taxes (and zero corporate income taxes that are contained in another part of the GOP tax proposal).
“We realized that hit (on local government) is a lot of money and I’m not going to try to persuade you otherwise,” Stringer said, “On the other hand, it is a negative impact on certain industries’ commercial and rental properties and is something I think we need to address.”
Stringer said he did not believe local governments would necessarily raise taxes. “I’m always amazed at people’s abilities to take a tax decrease and turn it into a tax increase.”
The subcommittee passed both the manufacturing and commercial/rental tax decrease bills by a 3-2 vote along party lines.