Realtors rally for big tax change

Well-to-do buyers are walking away from real estate deals because recent changes to the tax structure in the South Carolina have caused tax bills to jump sky-high when a piece of property changes hands, according to the South Carolina Association of Realtors. Just when a revived real estate market could help return the Palmetto State's economy to health, Realtors say the 2006 passage of point-of-sale tax reassessment is strangling their already beleaguered industry.

"We need the real estate industry to help lead us out of this funk - depression, recession, whatever you call it," said Meybohm Realtors broker Ron Pope. "In reality, what we've done in South Carolina is kick the real estate industry square in the stomach when it's already down."

Pope chairs the legislative affairs committee for the Aiken Board of Realtors, a group composed of agents and brokers from around the area.

Dozens of Aiken County Realtors plan to join colleagues from around South Carolina Tuesday on the State House steps where they will make their case for the changes to the law in the waning days of the legislative session this week. The Senate is expected to debate a measure this week that would eliminate the point of sale practice.

On the other side of the issue, city and county governments around the state have slashed their budgets as they face the worst economy in decades. Without new properties being developed, they argue the only avenue for growth in the tax base is to tax recently sold properties at their actual value instead of the artificially lower value imposed by a 15 percent cap on value increases for existing homeowners.

South Carolina voters approved both measures - the 15 percent cap in value increases every five years for existing homeowners and the removal of that cap when a sale takes place - in the same 2006 referendum. This week, the Realtors hope the S.C. Senate will take up a measure that would keep the cap in place and extend it to new buyers as well for up to five years. Any subsequent assessment would also be limited by the 15 percent cap, even for recent buyers.

Realtors say the change is necessary to get sales going again. Taxing authorities and opponents say it is having your cake and eating it too by allowing high-end real estate buyers to pay taxes on a lower percentage of the value than those who own more modest properties that have not seen an increase in value.

Pope and Kristyne Blake, association executive for the Aiken Board of Realtors, met with the Aiken Standard Friday to discuss the issue, saying they do realize local government is struggling and that an overhaul of the whole taxation system is probably warranted. However, real estate sales is their primary focus and the reason they'll be in Columbia on Tuesday and ask senators to pass the proposal before them.

"Our Realtors have lost deals because of this issue," Blake said. "People are going to buy in Georgia and North Carolina and Florida instead of here, and they're doing that when they learn that the current owner is paying one level of taxes, but they find out that they will have to pay far more when they buy."

A big part of the problem for local buyers and agents has been the surprise factor. When a house is sold, the buyer pays the same tax rate for the remainder of the first year. The higher rate doesn't come into play until the next tax bills come out with the new, higher assessed value.

"We had a woman buy a house over in Woodside assuming her taxes would be the same as the seller's were," Blake said. Now, Blake says, the taxes have jumped up so high that she can't afford it, and she's going to have to sell the house.

"Prospective buyers are not buying homes because of the hike," said Robyn Reilly, broker associate with Meybohm Realtors, noting a certain client's taxes jumped from $1,200 to $3,600.

"Nobody likes property taxes," said Aiken County Administrator Clay Killian. "But it is a very stable source of revenue to fund services."

Last year, County Council budgeted $25.3 million in property taxes, about half of its general budget.

But Killian admitted the point-of-sale tax does create inequities among similar properties.

"Our legislature has been examining property tax for some time, but they need to look at all taxes and not just pick and choose," he said.

Point-of-sale taxes also stands to expand Aiken County's tax base, and that could benefit the Aiken County School system.

"Our tax base would grow some for our debt service," said Comptroller Tray Traxler. "We can have 8 percent of all the assessed value for debt service, so we can increase how much we borrow."

District 25 Sen. Shane Massey said he can understand both sides of the issue but noted that the Senate just passed a $50 million cut in aid to local governments. Aiken County will feel the strain from that while it, and counties across the state, are already trying to absorb negative effects of the flagging economy.

"I am afraid that it will cut services," Massey said. "I don't want the sheriff to lose deputies. The challenge is trying to find that balance. It is something that is getting a lot of attention in the Senate."

Staff writer Haley Hughes contributed to this report.