S.C. House leaders unveil tax-cut plan

COLUMBIA, S.C. - About 90 House members have signed on to Gov. Mark Sanford's plan to reduce the state's income tax rate during the next decade.

That overwhelming majority in the 124-member House makes it likely a proposal to cut the top rate to 4.75 percent from 7 percent will sail through the lower chamber with the backing of House Speaker David Wilkins, R-Greenville.

Sanford said the change is essential to the state's economy and crucial to encouraging growth by small business as the state recovers from its worst years of job loss since the Great Depression.

"Our rate of job loss has been the highest in the country. We have an astounding jobs and economy problem," Sanford said.

Lowering the income tax will help move the state from economic dependence on big manufacturing plants now more frequently looking abroad, Sanford said.

"It is vital that we become more competitive as a state in growing small businesses, attracting investments, attracting capital to our state," Sanford said. "That's what this bill is all about."

"We're talking about raising the standard of living," said Wilkins, who worked with Sanford on the measure for several months.

The Legislature would have to agree to put $62 million yearly into paying for the reduction. Sanford said that's not a problem because the 2 percent growth requirement means the state will be generating at least $100 million more in revenue.

After the first year, the savings depend on the Board of Economic Advisors projecting the state's tax collections will grow by 2 percent of more.

The savings for an individual taxpayer would start next year. For instance, someone with state taxable income of $30,000 now paying $2,100 in state income taxes would save about $67 in the first year. After 10 years, that same person with the same income would save about $673.

For higher income people, the whole-dollar savings are greater. Making the state more attractive to people with higher incomes is a key element of spurring economic growth, Sanford has said. Those higher income people make decisions on where to expand businesses, set up their own companies or invest in startups, Sanford says.

"This tax cut will be an engine that will fuel economic growth for the next decade," House Ways and Means Chairman Bobby Harrell, R-Charleston, said.

Sanford's proposal won't quash other plans to reduce or eliminate property taxes, Harrell said. For instance, Harrell wants to increase the state's sales tax to pay for eliminating local taxes on cars. Another House measure would raise sales taxes to reduce home taxes.

Wilkins says the income tax proposal is further along than the other measures and likely to clear the House first.

Sanford says he has powerful support in the Senate, including from President Pro Tem Glenn McConnell, R-Charleston.

But there are critics and skeptics inside and outside of the Statehouse.

"This looks like a political payoff," said John Crangle, state director of the Washington-based government watchdog group Common Cause. "This is a huge reward for his campaign contributors."

Wilkins said that isn't so.

House Minority Leader James Smith said curbing property tax reassessments should be a higher priority. "I have not had a single constituent complain to me about the income tax rate, but I've heard a lot about property taxes," Smith said.

It's hard to find support for the notion that cutting income taxes will do all that Sanford expects, College of Charleston economist Frank Hefner said. It "is not conclusive that state income tax rates affect economic development issues that much."

Some of the fastest-growing areas in the 1980s and '90s also had some of the highest taxes, Hefner said.