COLUMBIA,
S.C. (AP) - Plans to cut property and income taxes didn't get
rave reviews from the Senate Finance Committee on Tuesday.
Instead, there was an abundance of skepticism for Gov. Mark
Sanford's House-passed plan to reduce the state's top income
tax rate and a bill from Sen. David Thomas, R-Fountain Inn,
that increases the state's sales tax to pay for eliminating
property taxes on homes and cars.
Sanford's plan sounds like "the universal sky hook that
we've been looking for for years" to lift everyone up, said
Senate Minority Leader John Land, D-Manning.
Tom Davis, Sanford co-chief of staff, told the panel that
lowering the top income tax rate from 7 percent to 4.75 during
the next decade would spur economic growth and job creation.
It's also crucial in a state where 3,600 small businesses have
evaporated between 1998 and 2002, Davis said.
But income taxes amount to little more than a "twinkle as
far as a business man is concerned in my experience," Sen.
Verne Smith, R-Greer, told Davis. Smith runs an Upstate tire
company.
"I can assure you that we do look at the income tax," Sen.
Greg Ryberg, R-Aiken, said. Ryberg ran a chain of convenience
stores. A lower tax rate would have put more money into the
economy, Ryberg said.
Davis, a lawyer who helped run a Beaufort area law firm,
said small businesses like his could save $25,000 a year with
Sanford's proposal, Davis said. And that's enough to add a
paralegal to the payroll, he said.
The role income taxes play in the state's economic growth
is a key point in the debate awaiting Sanford's plan. Thomas
pointed out that the state attracted huge companies, including
BMW's automative manufacturing facility in Greer, during
recent years with its current rate.
Davis said the industrial job growth game has changed since
then. Inexpensive land and labor are no longer the top draws,
he said.
While Davis conceded the income tax plan was "no silver
bullet," others wondered if it was a lead balloon.
An educated work force is now a top draw, Land said. And
the tax cut bills offer little in the way of adding extra
dollars to providing that, he said.
Sen. Linda Short, D-Chester, wondered what would happen to
people on the lower rungs of the state's economic ladder if
the $1 billion Sanford's plan would cost no longer came into
the state's coffers to provide services for them.
Holly Ulbrich, an economist with Clemson's Strom Thurmond
Institute, told the Finance Committee there can be good
reasons for cutting taxes. But the value of a home or a car
are typically good indications of a person's ability to pay
them.
Thomas' plan would be more regressive. Lower income people
wouldn't get as much of a break on their car taxes, but would
face higher sales taxes on goods they buy, she said. "I don't
see any equity or fairness," she said. Those same people also
tend to rent homes and aren't likely to reap benefits from
lower property taxes, she said.
Sanford's income tax plan is a step in the right direction
but needs adjustments, Ulbrich said. For instance, the rate
would drop slightly each year the state's revenue forecast
grew by more than two percent. Ulbrich says it should be tied
to the rate of inflation plus a percentage point.
The bills now are headed to a subcommittee where senators
will decide their fate.
"I think it's going to be very difficult to find a
consensus," Sen. Thomas Alexander, a Walhalla Republican and
member of the subcommittee.
