Study reveals inequities in South Carolina’s property tax system

   An Analysis of the Impacts of Point of Sale
   Conclusions of Analysis
   Study shows S.C. property tax inequities SCBizNews • March 11

COLUMBIA, S.C. (March 2009) — A research study conducted by Professor Tim Allen, Ph.D., Director of the Carter Real Estate Center at the College of Charleston, concludes there is considerable inequity in South Carolina’s property tax system.  Changes made to South Carolina tax laws in 2006, particularly Point of Sale Assessments, create different tax rates for property owners.

Under the South Carolina Real Property Valuation Reform Act, the taxable value of property that does not transfer ownership is limited to an increase of 15 percent over five years. However, when a property does transfer owners, the taxable value is then based on the value of the property at the time of sale (commonly referred to as Point of Sale Assessment).

Point of Sale Assessment results in different tax rates for properties of the same value. When properties of similar value are taxed at different effective tax rates, the property tax system is classified as “inequitable.” The inequity can influence decisions to enter into real estate transactions, and affect supply and demand conditions in the real estate market. 

The results of the study showed: 

• Under the current property tax system in South Carolina, property owners face different property tax burdens relative to their properties’ values.  Thus, the system is “inequitable.”
  
  
• Point of Sale Assessment exacerbates the inequity in the state’s tax system. When property values are rising, the taxable value of the property may increase without limit.
  
  
• Values increasing: Point of Sale Assessment leads to the “Lock-In Effect” and decreases demand for property. The owner is reluctant to relocate to a property of the same value because the move will trigger an unlimited reassessment on the new property.
  
  
• Values decreasing: Point of Sale Assessment leads to the “Motivator Effect” and increases the supply of property. The owner is encouraged to relocate to a property of the same value because the tax liability of the new property will be lower.
  
  
• Extending the 15 percent limit on increases in assessed to properties involved in assessable transfers of interest will improve the equity of the state’s tax system.

For more information on this study and property tax inequities in South Carolina, visit www.getrealsc.com.

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South Carolina REALTORS® is the largest professional trade association in the state, serving as the voice of real estate for more than 19,000 members involved in all aspects of the residential and commercial real estate industries. REALTOR® is a registered trademark that identifies a professional in real estate who subscribes to a strict code of ethics as a member of SCR and the National Association of REALTORS®.