SOUTH CAROLINA’S PROPERTY TAX SYSTEM
Chapter 1: Introduction and Overview of South Carolina’s Property Tax System Upon examination of the principles of a sound tax system—equity, efficiency, stability, and transparency—this study finds South Carolina’s property tax system falls short. It is complex, inequitable, inefficient, lacks transparency, and it disproportionately burdens private enterprise. South Carolina’s method for calculating the property tax illustrates the complexity and inequities of its system. Properties are subject to assessment ratios that set taxable value at some proportion of market value, which varies depending on the type of property. Business properties are subject to higher rates than owner-occupied residential properties. Tax liability is calculated by multiplying assessed value by total millage rate (sum of county, municipal, school district, and special district taxes). Because primary residences are exempt from most school taxes, which are the largest portion of the millage rate, taxes are not applied uniformly. Businesses (commercial, manufacturing, and rental housing) are paying much higher effective tax rates. Act 388 of 2006 contributed to the disparity between taxes levied on businesses and primary residences by exempting owner-occupied homes from paying property taxes for school operating costs. Policies enacted after Act 388 have attempted to address equity issues but have instead added to the complexity of the system. The outcome is a convoluted system that creates wide disparities between effective tax rates on primary residences and businesses. Chapter 1 findings: (1) South Carolina’s property tax system is an outlier among the 50 states: • • • • •
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Charleston, South Carolina, ranks fourth in the nation among the most populous cities in each state for the effective property tax rate on manufacturing. Additional evidence presented in the report indicates that this high effective property tax rate on manufacturing is typical of the state as a whole and typical of the largest cities in each of the focus counties. (Estimates of effective property tax rates do not take into account the state’s extensive use of fees in lieu of taxes (FILOTs) to promote economic development.) South Carolina is one of only two states that systematically taxes industrial property at a higher rate than commercial property (the other state is Wyoming). South Carolina is the only state that does not levy property taxes on primary residences for the purpose of financing school operating costs. Charleston, South Carolina, ranks fifty-first (first being the highest rate) in the nation among the most populous cities in each state and the District of Columbia for effective property tax rate on median valued homesteads. Charleston, South Carolina, ranks first in the nation (first being the highest) among the most populous cities in each state for the ratio of effective property tax rate for apartments compared to owner-occupied homes.
