Act 388 still a sore issue with business community
Source: Greenville Online
March 2, 2015
COLUMBIA – Nine years after lawmakers passed Act 388, business leaders remain unhappy about the results.
For while those with owner-occupied homes saw much of their property taxes melt away, the 2006 law known as Act 388 shifted the tax burden to business property and vacation or rental homes.
According to a national study last year, South Carolina’s businesses now shoulder more of a share of property tax than businesses in all but three other states.
“Act 388 has not been good for South Carolina,” argued Lewis Gossett, president and CEO of the S.C. Manufacturers Alliance. “The fault in that all along has been the notion that the state was trying to reduce a tax it did not collect. And quite frankly, it was trying to reduce a tax that at the time, wasn’t one of the most burdensome in the country.”
The industrial property tax in South Carolina, he said, is the highest in the United States.
Act 388, he said, tilted the share of property taxes too much into the lap of the business community.
“That’s not a good foundation on which to build a tax system. It’s not good for our economy. And it’s not a good method to use to fund our schools,” he said. “Other tax dollars that could be used to meet needs that are necessary, like roads and bridges, are now being allocated to basically make up deficits for legislative policy.”
Ted Pitts in 2006 was a member of the state House of Representatives and a co-sponsor of Act 388. Today he is president and CEO of the South Carolina Chamber of Commerce.
He said the business community has never been happy with the law.
“It limits the ability of local governments to raise taxes on anybody but non-owner occupied property,” he said. “So when they try to generate more revenue, there’s really only one place they can go and that’s property tax through businesses, small and large.”
He said South Carolina businesses pay some of the highest property taxes in the country.
“If you look at any business, they have to be profitable,” he said. “And if they’re profitable, they expand and add employees. So when you have costs that are high, it limits their ability to grow and add employees. So it does affect business decisions.”
He said the chamber opposed the bill in 2006. But he said their opposition was overshadowed by the voices of angry homeowners.
“There were a lot more homeowners and a lot more votes when you tally that voice,” he said. “It was an issue that needed to be addressed. The manner in which the General Assembly, which I was a part of, chose to address it, was Act 388. No, it wasn’t a perfect bill.”
Pitts said he does not believe the business community thinks it is realistic to expect the law to be repealed.
“The reality is that the homeowner is a voter and has a broad constituency base for any elected official,” he said. “So realistically, if you’re talking about coming in and taking property tax relief away from a homeowner, we all realize that’s unlikely. But we do think at some point the General Assembly could look at tax reform in its entirety and the burden that is being pushed on the business community.”
He said that opportunity could come when lawmakers address education funding reform.
Senate Majority Leader Harvey Peeler said there were more homeowners at the time pleading for tax relief than there were businesses protesting the proposed relief.
“So now our philosophy of government is to give businesses a break, too,” he said, “Either through business licenses or corporate income taxes. That’s why you hear so much talk about that. We’re trying to give our business community a break also.”