This article is written by Aastha Verma, from Kalinga University, Raipur, Chhattisgarh. It describes the Property tax in South Carolina and the special provisions to it for senior citizens.
The property tax law of South Carolina aims at providing property tax relief to the homeowners because of which it becomes complex, nontransparent, non-competitive. A general property tax is applied to all property uniformly and evaluates the effect of a five years reassessment cycle on the equity of the property tax. Adopting any tax policy involves trade-offs and citizens of each state and local government are the best to choose the policies through which they can achieve their aims. The property tax liability is reduced by the fees in lieu of a tax programme, which leads to new jobs and investments in the state. Local governments’ ability to raise money is hampered by the importance of property taxes and base erosion. The property tax represents 27% of total revenue in South Carolina. The burden of taxation is distributed but is not always equitable and efficient for the citizens.
South Carolina and the perception about property tax
- The property tax in South Carolina is an ad valorem (according to value), applied to all real property and personal property like motor vehicles, boats, and airplanes, etc. Property tax has been reformed in the past decades and it reduces the tax revenue in many ways.
- During the 1990s, many states have limited the growth of the property tax by enacting various relief programs and by expanding various economic developments which include incentives for business location.
- Many reforms have changed which transfers the fiscal responsibility from local government to the State government and fundamentally changes the relationship between the layers of the government.
- Property tax exemptions for homeowners were common law in South Carolina, as lawful residents are exempt from the property tax that pays public school operations.
- South Carolina also provides property tax exemption to charitable non-profit organizations as some of them provide service to underserved groups because of which over the last ten years the number of charitable groups has increased by 55%. It is noted by National Center for Charitable Statistics, 2014 because of which there is additional stress to the municipalities and therefore some municipalities have narrowed the definition of the non-profit organization which helps to regain the lost tax revenue.
- Payment in lieu of taxes is a negotiated agreement between the non-profit organizations and the local government where they have to pay a one-time payment to recurring donations. This is voluntary i.e. not required by law as municipalities have the right to redefine the expanded operation, territory or mission for a non-profit organization. They can negotiate some terms, and the payment should be in monetary worth.
- Hospitals providing social services such as free clinics to the poor people or healthcare facilities for city employees are examples of services in lieu of taxes.
- The property tax base measures a blend of wealth and consumption. In South Carolina, real property is classified into agricultural, residential, rental, commercial and utility. Therefore, taxes are different in the way they are assessed.
- The taxation of intangible property is difficult as the collection and compliance prices are high because the intangible property can be hidden, moved, or changed in different forms just to reduce the tax.
Salient features of property tax
- Property taxes are different from other forms of taxes as they change frequently. Every year the local government sets the property tax based on the revenue needed for the value of real estate.
- There are different types of property that can be taxed. The broad categories are-
- Moveable property like- vehicles and intangible property like- ownership, goodwill
- Improvement to land like buildings, roads, industries, etc.
- The property tax is a salient tax that is billed annually unlike the income and sales taxes.
- When the budgetary requirement remains the same and property is removed from the tax base, the other rate increases with the remaining property. If rates are not increased then, the government will fail to meet its revenue goals for service provisions.
- The property tax provides a more stable revenue source as the property values are stable.
- The State utilizes a classified tax system in which property is classified based upon its use and tax differently.
A look into South Carolina Property Tax for Senior Citizens : the key aspects
The State of South Carolina has special provisions for the age group of 65 years or above or the one who resided in the state for at least one year. When the deceased spouse was above the age of 65 and the other spouse was over the age of 50, the person is eligible for this benefit. The benefit is known as the Homestead Tax Exemption. It removes the part of home value from the taxation, which lowers the taxes of the person. It is a complete exemption on taxes on the first $50,000 in the fair market value of legal residents above the age group of 65 years. It also applies to the residents with disabilities and who are legally blind.
Accessing the exemption
To receive this exemption by July 15 of every year it would be initially claimed at the auditor’s office. If the person is unable to go there by themselves then they can authorize someone to make an application on their behalf. They should have some valid form of documents for age proof like birth certificate, medicare card or license in which age is mentioned. Also, there will be a probability that the whole income tax will be deducted if someone itemized deduction in the federal returns. They do not need to reapply annually but only in the case of the death of an eligible owner or when they move to a new residence. The surviving spouse receives the Homestead Tax exemption benefit if the spouse meets all the following conditions –
- The surviving spouse is still living in his/her primary legal residence.
- Obtains a complete fee simple title or a beneficiary of the trust that holds title to legal residence within nine months after the death of the spouse.
- Remains unmarried.
If someone moves to South Carolina they can get the Homestead tax exemption benefit. If –
- He/she holds a complete fee simple title to the primary legal residence.
- He/she is a legal resident of South Carolina as of December 31 preceding the tax year of exemption.
- Must be of 65 years of age or declared permanently disabled by the state or is legally blinded and is certified by a licensed ophthalmologist.
The state and the local Government likes to attract retirees as they don’t demand facilities of the field of school, police and other local services. In Palmetto, Colombia and South Carolina, the senior citizens have to pay very little or even no tax for the State, this helped them a lot financially. In 2018, more than 450,000 residents were exempted from the property tax through the Homestead Program.
Way ahead for South Carolina with property tax for senior citizens
Not all elderly people are on a fixed income as some have businesses and others have private jobs. Elderly people have less income than younger families that’s why the State of South Carolina is providing relief to retirees. The senior citizen’s income is stagnant and they are usually living on a fixed income even after hiking all the basic amenities which include their taxes, food, gas, medicine etc. Sometimes they have to decide whether to purchase medicine or to pay the taxes. So this step taken by the government is helping the individuals tremendously. The government thinks that money should be used for the most vulnerable population who needs it the most and this is the best way to help the individuals in maintaining their houses.
- Because of low property tax and special provisions for senior citizens, South Carolina has landed on Kiplinger’s list of top 10 tax-friendly states for retirees.
- After retirement people look for the State of South Carolina because of low tax exemptions.
- People also used to sell their houses and move there so that they have to pay less property tax. Also, vehicle registration, hunting and fishing licences, and parking fees are all lower, making it more appealing to relocate here.
South Carolina political institutions
Property tax must be understood within the large framework of public revenue. The South Carolina Republican Party is anti-tax and supports less progressive taxation, reduction of income tax, no new tax which helps provide context for the state policy. The party thinks that an ideal tax system generates enough income while dispersing the tax burden in a very simple and cost-effective manner. Because it distributes taxation based on fair market value, a broad-based tax system is more stable and has the capacity to develop as a population and inflation.
Problems faced by the citizens of South Carolina
- The evaluation of the revenue system has analyzed some problems which were faced by its citizens. The state does not regularly raise enough money to support the public for education, infrastructure and health care facilities.
- The state’s roads and bridges need repair but because of revenue adequacy issues, they are as it is. South Carolina is not equitable across different directions like between rich and poor, senior citizens and younger ones, online vendors and homeowners and non-homeowners, etc.
- Property tax exemption, incentives for business location are not always given to the people who are in need. When examining the distribution of tax burden, the people between the income from $27,000 to $40,000 are the people who paid the highest percentage of taxes. And the income tax paid by the elderly group is 80% lower than the families under the age group of less than 65 years.
- The revenue system has faced several issues which include limits on taxation, internet sales, low gasoline tax rate and reform of property tax relief.
- South Carolina has the lowest gasoline tax rate in the country which lowers the revenue tax rate gathered from truck drivers from the state. It’s difficult to add it in other taxes which results in a lower growth rate of tax revenue.
- It only taxes 36 out of 160 services that are taxed in other states. As a result, purchasers spend more on things that are not taxed, punishing the economic base.
- All of this contributes to a shrinking tax base, revenue inadequacy challenges, and equity and inefficiency issues.
- The country differs vastly in terms of rich and poor, the dollar guarantee per country is a windfall gain for some areas while distributing very little to the others.
The State of South Carolina is based on two forms of property tax expansion, one for non-profit organizations and the other is for senior citizens. Also, it is the 9th ranked state in Kiplinger’s ranked list as it has less property tax for retirees. Also, the same scheme is provided to the people who are permanently disabled and are legally blind. Various hospitals have provided social services in their clinics and treatment for the city employees. As the senior citizens have limited income, this initiative taken by the government helped them financially. Also, the government believes that money should be used for the most vulnerable group who require the money and the senior citizens are one of them. The special provisions for senior citizens are helpful but because of low property tax, the government does not have enough money to provide better education facilities, infrastructure and to repair the roads and bridges which is a negative impact on the state of South Carolina. Property tax provides taxation based on the fair market value.
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