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By John DeWorken
Burnie Maybank is considered by people in Columbia political circles and in the tax world as the smartest guy in South Carolina. Like the old E.F. Hutton commercial, when this two-time director of the S.C. Department of Revenue and now attorney with Nexsen Pruet speaks, people listen. Maybank serves as chairman of the South Carolina Tax Realignment Commission, also referred to as the TRAC Commission. The TRAC Commission was established by the SC General Assembly to look at the state’s overall tax structure, mostly because of the havoc a bill called Act 388 has caused.
In 2006, leaders in the S.C. House and S.C. Senate hung their hat on a bill that would give residential homeowners a break in the amount of property taxes they pay each year by increasing the state’s sales tax to six percent. Essentially, the bill, Act 388, provides that homeowners would no longer be required to pay the school portions of their property taxes.
Lawmakers said at the time that this bill would reduce homeowners’ property taxes by up to 60%. In this regard, the bill was good for homeowners. Unfortunately, the bill was not good for anyone else.
The bill proved to cost businesses more to do business in South Carolina. Commercial property was given no relief in the bill, yet businesses had to shoulder the extra penny sales tax, amounting to an extra $250 million of costs to do business in South Carolina. Businesses also are on the hook for double-digit increases from school districts scrambling to meet budgetary needs.
The bill negatively impacted school funding because depending on sales taxes to pay for school funding proved to be a risky business, especially in down years. Property taxes are much more dependable and don’t have the volatility over the long term.
The real estate business also was impacted. Real estate companies are scrambling because they say the new point-of-sale provision in the bill (homes are assessed only at the time of a sale) are scaring potential commercial and residential buyers to other states.
Officials from municipalities, too, say that Act 388 has negatively impacted their revenue stream.
Maybank and the TRAC Commission have the difficult task of providing the General Assembly a recommendation to structure the state’s tax structure in a way that that would encourage economic development. They are expected to do this by March (though some observers say that the March deadline will be extended).
Over the next couple of months, the commission will look at the way in which the state collects money, including sales taxes, property taxes, income taxes and fees, fines, and forfeitures. The commission also will look at the billions of dollars of sales tax exemptions now allowed on the state’s books.
Businesses, schools, real estate interests, municipalities, and homeowners all hope that the TRAC Commission will come out with a recommendation that will put the state’s tax structure on a competitive track and one that is fair to all.
All citizens should hope for a recommendation that will get more folks back to work; more businesses to grow; and, more opportunities to grow the state’s economy.
John DeWorken is partner in Sunnie Harmon & John DeWorken, LLC, a government relations and advocacy firm. He can be reached at deworken@sunnieanddeworken.com.
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