Small business wins on taxes

e-mail this story discuss this issue in our forums

The governor's tax-cut plan was cut deeply in the state Senate, and wisely the House and Sanford agreed to the reduced package rather than risk another year ending without this generally sound idea making it into law in some form.

The Senate got weak knees after looking at the price tag for the entire tax cut. Economists predicted that when fully implemented, the income tax cut would cost the state $1 billion. And fear had spread that South Carolina would lose its Triple-A credit rating because of the effect the lost revenue would have on the state budget.

The bill Sanford is scheduled to sign this morning will cut the top rate on state income taxes for small business from 7 percent to 5 percent over the next four years. The proposal embraced by Sanford, and originally the House, would have cut the top rate on businesses and individual taxpayers to 4.75 percent over a longer period of time.

House Speaker David Wilkins of Greenville urged his fellow representatives to go along with the Senate bill — what he called "more of a bird-in-the-hand kind of thing."

The scaled-down tax cut will apply to sole proprietorships, partnerships, limited liability corporations and businesses filing under subchapter S. When fully implemented, the bill is expected to cost $129 million.

Of course, the price tag for implementing the bill ignores the potential an income tax cut has for revving up the state's economy. South Carolina's top tax rate is high compared to its neighbors, and it kicks in at about $12,000, a rather modest amount. Industries in this state pay a top tax rate of 5 percent.

Small businesses are the backbone of any economy, including that of this state. Small businesses create almost three of every four new jobs, according to the National Federation of Independent Businesses.

And in a knowledge-based economy, small businesses have a particularly critical role to play. They will employ more people in a climate that has seen manufacturing jobs disappear at a fast clip, and they potentially can provide better-paying jobs.

Small-business owners who find more money in their bank accounts in another year or so will have more money to invest in job development and higher salaries. All South Carolinians will benefit when that happens.