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Palmetto Pledge to put focus on jobs

Lawmakers stress that small business is the backbone of the economy and must be given incentives
BY MATTHEW MOGUL
Of The Post and Courier Staff

Coming up with ways to create new jobs is the centerpiece of this year's Palmetto Pledge, the annual legislative agenda for Republicans in South Carolina's House of Representatives.

This year's version of the pledge includes a proposed 2005 Job Cretions Act, which includes measures to expand the state's current job tax credit and create tax credits for small business investment and employee health care.

"Obviously it (job growth) is one of the mainstays of our legislative agenda. It's all about helping small business expand and grow," said House Speaker David Wilkins, R-Greenville. "Our unemployment in the state is unacceptable ... we have to do all we can do to stimulate the economy, and we recognize that small businesses are the backbone of the economy."

South Carolina's unemployment rate of 6.8 percent in October was one of the highest in the country -- the national average was 5.4 percent -- and is emblematic of a state that has seen its manu- facturing base erode as domestic factories, such as textile plants and steel mills, fail to stay competitive with overseas rivals and either dramatically downsize orshut down.

Some economists say it's high time to hitch the state's growth plan to a new economic engine, one not tied so tightly to heavy industry.

For years, generous economic incentives packages have been rolled out to attract manufacturers promising to hire thousands of South Carolinians. Now, lawmakers are saying some incentives should be directed toward small businesses, which by most accounts are responsible for the largest share of the nation's job creation.

Wilkins said the roughly 30-page bill is still very much a work in progress and subject to plenty of tweaking, some of which will likely come by next week when the bill is prefiled, or placed in a committee before the start of the session. He pledged to fight to pass all five components of the agenda in the first 90 days of the session.

However, legislators say they are committed to the idea of using tax credits to spur growth, though how much that approach may cost taxpayers in the short term is unclear.

One provision would increase the number of small businesses that qualify for a tax credit for hiring new workers.

Currently, a company must hire at least 10 workers, and law- makers plan to cut that number in half.

Another proposal would offer small businesses a tax credit to encourage them to offer health insurance for employees.

A lack of coverage at many small businesses has been cited as a factor in the rising number of Americans with no health insurance.

In addition, the cost of providing insurance leaves some business owners unable to expand their payrolls.

Also on the agenda is a proposal to encourage investments in small businesses by offering tax credits to anyone who makes an investment of a specific minimum size in a small enterprise. Similar plans have already been created in some other states, including North Carolina.

"In a nutshell, this bill is taking the advantages that big businesses enjoy today and applying them to the state's small businesses," said House Ways and Means Chairman Bobby Harrell, R-Charleston, who worked closely with Wilkins on the bill. "The vast majority of economic growth in South Carolina comes from our small businesses. Helping them helps everyone."

Though it's lacking many concrete details, any initiative to encourage entrepreneurship is a good start, said Michael Fields, South Carolina director of the National Federation of Independent Business, a lobbying group.

"This speaks volumes to me that we are starting to understand and realize how important small businesses are," said Fields, who has been called on by lawmakers to help firm up the legislation. "This incentive package is fertile ground for growth and sends a very clear message to those entrepreneurs who risk everything to run a business."

Frank Knapp, president of the South Carolina Small Business Chamber of Commerce, has already contributed to the bill's first draft with some advice and is upbeat about the approach.

"Up to 80 percent of jobs in South Carolina are small-business," Knapp said, explaining that his 10,000-member organization defines small businesses as having 100 or fewer workers. "We are the group that kept adding jobs during the recession when big companies were laying people off jobs or moving jobs overseas. How many small businesses do you know that moved jobs overseas?"

However, Knapp doesn't believe tax credits will work as an inducement to get companies to offer health care.

"Small businesses are concerned with cash flow and paying the bills," he said. "They are not going to foot the bill on health care costs today and wait 8 months or a year to get a tax credit."

Don Schunk, a research economist at the University of South Carolina, also applauded the effort, saying the state hasn't done much in the past to promote small-business interests.

"If this is done right, then it will do a better job at targeting small businesses than plans to cut income taxes, which affect everyone," Schunk said.


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