Tom Davis: The Right Way To Fix Act 388

LAWMAKERS MUST REFORM CODE, RETURN REVENUE TO TAXPAYERS  By Tom Davis || In 2006 the South Carolina General Assembly responded to outcry from over-taxed homeowners with a law that eliminated school funding from their property tax. Unfortunately, that’s only half the story. When lawmakers passed Act 388, they didn’t cut…


By Tom Davis || In 2006 the South Carolina General Assembly responded to outcry from over-taxed homeowners with a law that eliminated school funding from their property tax. Unfortunately, that’s only half the story. When lawmakers passed Act 388, they didn’t cut our overall tax burden, but expanded it by imposing higher sales taxes and additional taxes on businesses, second homes, and industrial and manufacturing properties.

Another insidious impact of that law is this: putting a higher tax burden on those other categories of property deters private capital investment and adds to an unhealthy crony-capitalism environment where a handful of powerful politicians can, and do, provide special treatment to well-connected companies.

So the question isn’t whether Act 388 should be amended, but how. As we begin that process, two facts must be kept in mind: First, state government in South Carolina takes far too much money out of the pockets of South Carolinians. Second, tax reform never benefits the people unless the overall amount of government spending decreases; simply lowering one tax while raising another – so-called “revenue-neutral” reform – is nothing but a shell game.

Advocacy groups that thrive on government spending insist we are taxed too little, but that is not true. Consider this: In the past three years, politicians in Columbia have increased general fund expenditures by 19 percent (from $5.11 billion to $6.08 billion). By comparison, average per-capita personal income of South Carolinians over that same span grew by only 6 percent (from $31,448 to $33,388).

Even this horrific statistic grossly understates how much money state government from the people. A second category of spending, referred to in Columbia simply as “Other Funds,” has exploded over the past decade. The expenditure of these “Other Funds” – a shorthand reference to agency fees that are nothing more than hidden taxes – skyrocketed from $4.8 billion in 2002 to $8.2 billion in the current fiscal year.

In the last legislative session I proposed a spending cap to limit state spending to core services, with surplus money returned to taxpayers. My proposal failed by a vote of 24-18, with eight GOP state senators voting “No.” This past November’s election, however, ushered new fiscal conservatives into the state senate, so 2013 could be the year this reform passes.

Which brings us back to Act 388. Some simply want the law repealed. I reject that approach because it would more than double property taxes on homes, and do nothing to reduce the overall amount of money taken from individuals and spent by government. Unless the overall amount of government spending decreases, it is better to do nothing and spare people the illusion that politicians are actually doing something worthwhile.

A better approach is to impose the cap on government spending, and use money in excess of the cap to provide tax relief for owners of properties who did not benefit from Act 388. Had state government spending increases been limited to the rate of inflation over the past three years, $622.5 million dollars could have been returned for this purpose. And if a similar cap had been imposed on the “Other Funds,” even more tax relief could have been effected.

Another important thing to consider: Our state’s sales-tax code is riddled with over 100 loopholes, which means that on an annual basis more sales taxes are exempted ($2.7 billion) than collected ($2.2 billion). Some exemptions, like those on food and medicine, are at least reasonable, and benefit the public as a whole. But far too many are simply the result of powerful industries hiring the right lobbyists.

The South Carolina Supreme Court is now considering whether these exemptions violate the equal protection clause in the state constitution, and it is likely to order the repeal of special exemptions that do not meet that clause’s “rational basis” test. It is expected that such a ruling will, at a minimum, result in the repeal or amendment of 60 exemptions, yielding about $600 million in new annual tax revenues.

There is already a strong push for government to spend every last penny of this anticipated new revenue, so we must discuss now how to instead pump this money back into the economy. And using it to provide property-tax relief to industrial, manufacturing and other commercial properties is an excellent alternative.

The bottom line is this: Given the excessive level of state government spending, and the prospect of at least $600 million in new sales-tax revenue, it is not necessary to raise any taxes – income, property or sales – to remedy the inequities and undo the damage caused by Act 388.  This week I was appointed to the last spot on the Senate Finance Committee, and I will use my seat at the fiscal table to resist tax increases, limit spending and return money to the people.


Tom Davis represents Beaufort County in the South Carolina Senate.

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Really?!? December 12, 2012 at 3:06 pm

I could not agree more! Now let me say this. Until Tom Davis grows a set and is willing to call out the leadership on the senate floor, the tv and print media and anywhere else anyone will listen he is still part of the problem.

He has some great ideas, he just lacks the nuts to call them out for it! He is either going to fight for smaller govt. or be someone that Leatherman and company just pat on the back and tell him “we just cant do that this year”.

Same old song and dance, just a different band.

Steve December 12, 2012 at 3:26 pm

Act 388 impacts property taxes which go to schools and local governments to fund police, fire protection, county road maintenance, etc. Capping state spending, while a noble idea, doesn’t affect local government needs. Here is an idea – take the state fiscal handcuffs off local government and let them face the voters on their spending or lack thereof. The legislature needs to worry about state issues and get its nose out of local government. Bad things like the Richland voting fiasco happen when you let the delegations meddle in local affairs.

Joe Wilson Is A Very Smart Man! December 12, 2012 at 3:31 pm

Makes too much sense

Hypocrites like Davis?

Oh they’re all for that libertarian bs till it affects their little power base

Fact is its local government that affects people’s lives

What in the Hell should those clowns in Columbia have to do with it?

Knott December 12, 2012 at 3:38 pm

There IS NO SURPLUS MONEY. Good grief people. Even if there was, which there isn’t, it should be held for periods when the state is running a deficit… Like now for example, they are running a deficit.

BILL December 12, 2012 at 4:05 pm

This Act has failed to decrease School Taxes.
Schools like Lexington District 5 have found a way around the Law and have actively added nearly 50% higher taxes on Lexington District 5 property owners since the law was passed.

Richland County is dropping all kinds of School taxes on homes that have become property of heirs after the deaths of loved ones. Taxes go up 500% or more in one year. Families trying to save the old homestead are being forced to give them up for the taxes. A complete rip off and clear violations of the Act’s and Laws intent. Lose your homestead exemption and lose your family’s home.

junior justice December 12, 2012 at 4:22 pm

Sounds like a good opportunity for some investors to buy them at bargain prices. Any idea if that has been happening? Could it be just an opportunity or could it be part of a scheme?

Anybody have info on this?

Crooner December 12, 2012 at 4:06 pm

Poor Tom. With Demint stepping down now he’s going to be stuck in the SC senate forever.

Jay December 12, 2012 at 4:21 pm

The tax rape imposed on my “investment” properties by the state of South Carolina and the county of Richland prevents me from making much needed improvements to my primary residence. Small house on Rosewood Drive went from $500 a year to $2000 a year. Small house in Elmwood park went from $1000 a year to over $4000 a year. The point of sale tax I got popped with on my primary residence that I bought in 2007 is criminal. Houses on either side of mine, in similar condition and size, are currently assessed at nearly $100k less than mine. All because I purchased when the market was strong.

Zobro December 13, 2012 at 12:56 pm

I have one on rosewood too. Thanks SO much mr taxman for diving up my costs to the point that I lose $50 a month to keep it occupied.

“Yeah, mrs renter I hear you talking about a new porch. Here’s Larry Martins f-ing phone number, tell him to come see you in Cola…”

A friend in GVL that has +100 rentals has a 3-part plan to address the idea that since 388 his business is losing money for 1st time in generations:
1. Elections every 2 year for local office
2. 12 year term limits for state office
3. Replace property tax completely w/flat tax (pick a plan and keep non-profits etc away)

I want to add a fourth to his plan: mandatory voting laws. Go vote. If you don’t vote it costs you a fine that varies depending on income (dont start democrating, there would be a minimum, so everybody pays something).

That gets us transparency, accountability, and eliminates the tax games all in one.

Now. Start saying stupid stuff.

Jay December 12, 2012 at 4:35 pm

Also, why in the name of Santa Christ should ANYONE owning property NOT be required to pay school tax? Especially if they have children that are benefitting from an education in one of the schools in their district? It should be evenly distributed like is was before this criminal activity was initiated.

The Tax Man Cometh December 12, 2012 at 5:00 pm

Shut up and Pay up!

Jay December 13, 2012 at 9:55 am

Yassir masser tax man, I’ve written about $10,000 a year in checks to Richland county for about 6 years now sir. Wow, $60,000 to a moronic municipal government that can’t even run a fucking election correctly, fix a failing sewer & water system, effectively deal with the homeless population, etc, etc. I feel like my kids future is being sodomized by the tax office.

Recovering Lobbyist December 12, 2012 at 5:13 pm

Well said Senator.

baker December 12, 2012 at 5:14 pm

I’m confused. It appears from this article — — that Sen. Davis wants to raise the sales tax, at least a small amount.

His column for FITSNews doesn’t mention that.

vicupstate December 12, 2012 at 5:56 pm

Every time people complain about property taxes, and the legislature passes some sort of ‘fix’, they end up just making the whole system more complicated and all sorts of unintended consequences result. Any savings are shortlived at best.

Property should be taxed at it’s true value, like it once was.

Jasper December 12, 2012 at 10:20 pm

Taxes on a rental home I own go from 770.00 to 2,399.00. Fucking ridiculous! And we sit back and elect these idiots, time after time, so they can take every dime they can get from us.

Were in a recession and the county has tripled my taxes. Now the county is building ANOTHER fucking crab dock 1 mile from my house. Just started construction! Poorest coastal county in SC and have a damn “crab dock” every 2 miles.

We spend around 2300 more per child than comparable school districts. For this we get failing schools. For this the school board rewards the super with an extension of her 5 year contract worth 170K per year with NO performance clause.

Facts are this. The people controlling the money make up 57% of the population, yet only pay around 22% of the property tax’s. Know why? They dont own shit! Constituents wont bitch! pass it on to the “Miniority” to pay.

Those are the facts,

Somebody send Help please!

Jasper December 12, 2012 at 10:24 pm

and by the way. My senator Pinckney wont even live here.

Old Bike Dude December 12, 2012 at 10:47 pm

Tommy Boy wants to substitute the current crony capitalism with his own brand of crony capitalism. New players and greater theatrics but the show has the same ending. Carpetbaggers representing carpetbaggers.

Greenville Gal December 13, 2012 at 5:34 am

I asked Joe Wilson a question about Act 388 s few months ago and he had no clue what it was and answered with a rambling rant about not raising taxes. The man is lost, confused, and its scary he’s in public office.

Trying to hard December 13, 2012 at 8:54 am

Davis’ bill seems to want to 1) give investment property relief 2) tinker with sales taxes and 3) cap govt spending all at once. No one is going to understand this, much less pass it. All three points may or may not have merit, but need to be addressed one at a time.

As to 388, if not flat out repeal, how about assessing residential and non residential at the same percent, maybe 5%?

Jan December 13, 2012 at 10:57 am

Repeal 388! It doesn’t work. It was never going to work. It was pushed through by people who live on the coast, who did not want to pay taxes based on the true value of their homes; but as soon as the law did not benefit them (i.e. after the coastal real estate market crash) they wanted to change it again. Time to reset to where we were before 388.


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