The South Carolina Senate agrees the state's property tax laws are flawed.
But disagreement on how to fix them Thursday scuttled what many considered a needed remedy to exorbitant taxes that buyers of commercial real estate are subject to at a time when the state is struggling through a recession.
The so-called point-of-sale bill was effectively killed in the Republican-led Senate on Thursday.
Leaders in the 27-member Republican majority failed to muster 31 votes required to pass it for the second-straight day.
But some lawmakers think a glimmer of hope remains. Realtors who pushed the bill will do some heavy lobbying over the weekend in an effort to swing three to four Democrats' votes, they said.
Disagreement on the bill splits along party lines and pits urban and rural counties against one another. Other lawmakers don't like the bill because lobbyists - representing real estate businesses and local governments - essentially hammered out the deal.
"As long as we allow inequi-ties in the tax system . . . you will always have people coming back to the Legislature asking for a fix," said Sen. Larry Grooms, R-Berkeley, the only Republican to vote against the point-of-sale legislation in Wednesday's critical third vote.
The legislation, born out of sweeping property tax reform passed in 2006 and known as Act 388, would have eliminated increased taxes on second homes, businesses and commercial real estate sold this year.
Pushed by Republicans, Act 388 shifted much of the property tax burden that supports schools and local governments from owner-occupied homeowners onto businesses, second-home owners and other commercial real estate interests in 2006.
Owner-occupied homes are taxed at 4 percent under Act 388, while second homes, businesses, and commercial real estate is taxed at 6 percent.
The legislation says that when sold, 6 percent property is to be taxed based on the selling price, not the existing, county-assessed property value, which in many cases is much lower than the selling price.
After a few years in the field, real estate agents complained and wanted commercial properties taxed like residential property. They told lawmakers the higher taxes were sinking commercial real estate deals at closing, presumably because the buyer was usually unaware of the law.
Grooms offered an amendment this week to get rid of the higher tax, which he said is one of the myriad problems in the state's property tax system, but the Senate voted it down.
"A deal is a deal," said Sen. Gerald Malloy, D-Darlington, speaking of Act 388, which now is law. Malloy said the stalled point-of-sale legislation is an attempt by Realtors to shift tax burdens yet again, this time away from urban counties with bustling commercial real estate markets, and those who can afford second homes.
Malloy, who joined Charleston Republican Sen. Chip Campsen last week in ironing out a legislative compromise on the Senate's controversial voter ID bill, said the legislation had other problems, too.
"I am adamantly opposed to the lobby doing the Senate's work," Malloy said of the compromise hashed out by Realtors, and county and municipal associations. "We're supposed to build our house on a rock, but we're building it on sand."
A call to the S.C. Realtors Association Thursday was not returned.
Sen. John Scott, D-Richland, produced figures showing Richland County would lose $2.1 million this year if the point-of-sale bill were passed, which he said local governments and schools can't afford.
"When we look at the losses that would have occurred in (recessionary) times, and the inability to make that up in new investments at a fast enough pace, this becomes problematic," Scott said.
Sen. Mike Rose, R-Berkeley, agreed. "You can't have entities that don't represent the taxpayer, cut a deal and tell the taxpayers they have to go along with it," Rose said. "When you start out with such a mess (referring to the state's tax system) nothing short of an overhaul will do."
Rose said one constituent in his Senate district told him the tax bill on a second home purchased since Act 388 became law went from roughly $1,000 a year to $7,000 a year, and the owner has been unable to sell the home.
Rose offered several amendments to the point-of-sale legislation this week that were rejected, but have since been introduced in the Senate as stand-alone bills. One of the those proposals is to make the Tax Realignment Commission, a group studying the state's tax and exemptions policies, include Act 388 in its review.
"If there were a straight up and down vote, I believe the Senate would put it under TRAC," Rose said.