By Sarah Young and Matthew Thornburg | Party leaders in South Carolina do not agree about much. But in an October debate between the chair of the Dorchester Republican Party and the chair of the S.C. Democratic Party, both agreed on at least one thing: South Carolina Act 388, which effectively eliminated property taxes on homes to fund school operations, was bad legislation.
This act was passed in 2006 at the height of the coastal real estate boom. Responding to pressure from active taxpayer organizations, the state legislature exempted owner-occupied homes from being taxed to fund public school operations and imposed a 1-cent statewide sales tax to make up the difference.
After 15 years, critics contend that Act 388’s “tax swap” has eroded revenues for public schools and decreased revenue stability for K-12 education, especially during recessionary years when sales tax receipts tank. State legislators from both parties frequently bemoan the budget constraints that Act 388 places on state and local governments. But the General Assembly has failed to address its pitfalls, assuming the public would revolt if school taxes were re-imposed.
But do South Carolinians even know that primary residences are exempt from school property taxation? Are they satisfied with their level of taxation, or would they prefer additional property tax support for schools? These questions remain largely unexplored since the initial passage of Act 388.
As a part of our research activities as higher educators, we sent a mail survey to a representative sample of S.C. registered voters in fall of 2021. The survey questionnaire measured the knowledge levels and attitudes of South Carolinians regarding taxation to fund public schools and included questions about respondent demographics and political behavior. Individuals receiving the mailing had the option to complete and return a paper questionnaire or fill out the survey online. We received 250 responses. After compiling the data, we weighted the responses on demographics to match the population of South Carolinians registered to vote. We then analyzed this representative sample of survey responses.
Our results show that the majority of South Carolinians are unaware of the Act 388 home tax exemption. When asked whether owner-occupied homes are exempt from school operations taxes, only 21% of survey respondents correctly responded that they were, with 44% being unsure. Conversely on a separate question, 63% of respondents answered (incorrectly) that home property taxes currently fund school operations in South Carolina.
Only 21% of respondents knew owner-occupied homes are exempt
from school operations taxes. Read the survey’s results.
Furthermore, our study revealed that this lack of knowledge was consistent across all segments of the South Carolina population that we measured. In no group of South Carolinians were most respondents aware of the school property tax exemption for owner-occupied homes. The most informed groups were those with home values greater than $400,000 and those who were retired. However even among these comparatively well-informed groups, only approximately one-third of respondents indicated awareness of the exemption.
Little tax appetite
Our other significant finding is that the public has little appetite to increase home property taxes to fund school operations, even though most homeowners currently pay no school millage.
Only 14% of respondents indicated they wished to increase residential property taxes to fund school operations. And 59% of respondents reported that residential property taxes were their least preferred option to fund K-12 school operations. There were variations here, however. Republicans, conservatives and homeowners all strongly opposed residential property taxes compared to Democrats and independents, moderates and liberals, and renters, respectively who expressed more distaste for increasing sales taxes. Still in the sample overall, property tax was clearly the least popular tax option.
It is possible that some of the resistance to property taxation is driven by lack of understanding that schools are funded more by sales taxes than by home taxes. South Carolinians need to have a more accurate understanding of the current low property tax burden imposed by school taxes to develop informed attitudes about education funding.
Moreover, homeowners opposed to taxation need to know about the existence of the school tax exemption if they are to “give credit” to our state legislators for maintaining exceptionally low school tax rates!
Few homeowners have a fondness for paying property taxes, even if to fund a needed service like public education. But at the very least they should know that they are being taxed little to nothing on their homes for school operations.
- Local government tax collectors and assessors could aim for clearer presentation of school tax relief credits on residents’ tax statements, including an explanation of why the credit has been applied.
- Real estate professionals and closing agents could be trained to better explain the property tax exemption to new homebuyers.
- State legislators could make a more concentrated effort to enlighten their constituents on the low school tax burden for homeowners, and the higher tax burdens placed on commercial property as a result.
Taxes are not easy to understand, but if tax opposition is an intensely felt attitude among our state’s electorate, it should be based on a firm understanding of the facts.
Dr. Sarah Young is an assistant professor of political science at the University of South Carolina-. Dr. Matthew Thornburg is an associate professor of political science at USC-Aiken and directs its Social Sciences and Business Research Lab. Have a comment? Send to: feedback@statehousereport.com
We Can Do Better, South Carolina!
I was horrified when Act 388 of 2006 negated property tax for public school support. I support property taxes over sales taxes to support public education UNLESS funds are taken from public schools to support private schools. Under the newly elected Supt of Education, I would fight any bill to change Act 388.
I think a sales tax to support schools is brilliant because this allows ALL people who are utilizing the schools (owner, renter, legal, undocumented) to contribute to the schools. Everyone needs to purchase things to live, so everyone will be contributing. If someone wants to fund their school taxes through their properties, move to NY. I pay over $10,000 per year for SCHOOL TAXES alone for my postage stamp sized property. This is on the lower end now in 2023. School tax based on assessed value even if improvements are done. Extra money goes in a reserve fund that keeps growing. There are 124 school districts on Long Island with 124 sets of superintendents, assistant superintendents and staff. So, be careful what you wish for Mary, once a tax is put on your property it will not be removed. I also believe in SCHOOL CHOICE. Why can’t a taxpayer have a choice where to send their child to school especially if they reside in a failing school disctrict? They are still paying taxes.