South Carolina Tax-Relief Law Drawing Fire

Major school funding shift seen as harmful by educators, business.

Some three months after South Carolina legislators changed how the state’s public schools are financed, educators and businesses are decrying a new property-tax-reform law for granting tax breaks to homeowners at the expense, they contend, of economic growth and K-12 education.

Even a national bond-rating agency is frowning on the new system.

Approved in May, the law is essentially a tax swap. Under the change, which could cut South Carolinians’ yearly property-tax bills by as much as two-thirds, homeowners will no longer help pay to run the state’s 85 public school districts through those taxes, though such revenue can still go for debt service. In exchange, the statewide sales-tax rate is going up, from 5 percent to 6 percent. The additional sales-tax money, which will replace revenue from homeowners’ property taxes, will be doled out to schools based...