COLUMBIA -- Some York County legislators call Gov. Mark Sanford's plan to cut state income taxes visionary; others think its shortsighted.
Five like it so much, they joined 84 House colleagues in endorsing the plan last week, including Rep. Greg Delleney, R-Chester; Rep. Gary Simrill, R-Rock Hill; Rep. DeWitt McCraw, D-Gaffney; Rep. Herb Kirsh, D-Clover; and Rep. Becky Richardson, R-Fort Mill.
Sanford wants to slice the top 7 percent of the state income tax rate by a third to 4.75 percent. His plan would reduce the tax rate in small increments over 10 years, possibly longer.
"I like it," Delleney said. "It's about job creation. We have a 5 percent corporate income tax. But most businesses in South Carolina are small, not incorporated, and they're paying that 7 percent rate."
Sanford spokesman Will Folks said the plan calls for the first of 10 nearly quarter percent rate cuts in 2005. He estimated the .225 percent cut would reduce state revenue by about $62 million that year.
Folks said the 2005 reduction would be unconditional, meaning it would come regardless of the state's economic circumstances. From 2006 on, subsequent cuts would be triggered only in years when the State Board of Economic Advisors project that state revenue will grow by at least 2 percent the following year.
"I signed on as a co-sponsor because it doesn't swap one tax for another tax," McCraw said. "And it doesn't really kick in until the state grows by something like $100 million."
S.C. Department of Revenue spokesman Danny Brazell said the tax cut would save a family of four with a taxable income of $25,000 after deductions about $29 a year.
Simrill said the real benefits of the plan would only become apparent in the future.
"The governor is not going to get kudos tomorrow because he passed this thing," Simrill said. "But years down the road we will be able to see how this made South Carolina more attractive to business. ... I give Gov. Sanford credit for being very forward thinking."
But Sen. Linda Short, D-Chester, said the governor's plan actually would hurt small businesses by forcing further cuts in the state services they need.
"All of the small business owners I've talked to about this can't see where it would help them at all," Short said. "They don't see it as a real benefit. They're also very concerned, as am I, about the loss of revenue. We're already struggling to fill holes, and we can't afford to give up revenue."
In 2002, the state collected $2.3 billion in income taxes from approximately 2 million filers. That represents 46 percent of the state's annual budget. Sales taxes make up another 36 percent, while various incentives and exemptions have reduced the corporate sector's portion to about 4 percent. The remaining 14 percent comes from a variety of other sources, Brazell said.
Sen. Wes Hayes, R-Rock Hill, said he hasn't decided whether to support the plan.
"I'm certainly willing to give it consideration," Hayes said. "I think anything that may result in new jobs should be considered. But I will be balancing it, obviously, against the need for the money in other areas."
While praising the potential long-term economic benefits of Sanford's plan, Sen. Greg Gregory, R-Lancaster, thinks it may be ill-timed. Three years of budget cuts have left most state agencies operating on about 30 percent less money than they had three years ago, he said.
"It is getting to the point where we don't have the money to provide basic services, the types of services government is supposed to provide such as public safety," Gregory said. "Over the long term, an income tax cut would grow the economy. I agree with the governor on that. But we need to catch back up to where we were first."
Contact Karen Addy at (803) 331-6923 or kaddy@heraldonline.com.
