Tax cut to help small businesses

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Bolt's Carolina Home Health Care, like thousands of other small businesses around South Carolina, is in line for a 28 percent tax cut through legislation that Gov. Mark Sanford will sign into law today.

Bolt said she would do exactly what Sanford and the state Legislature intended: Plow the savings back into her 41-employee company.

That can translate into improved services, more jobs and economic growth.

Anibal Tamayo of SA Tax Service said any tax cut is good for business because it represents a saving, but state reduction is less meaningful because the big hit comes from Washington and not Columbia.

But Bolt will take anything she can from government. "Any time we hear we're going to be able to reduce another expense for our company is exciting because that allows us to take that money and reinvest it back into patient care," she said.

Bolt, 49, said the majority of her company's $6.2 million annual sales comes from Medicare and Medicaid reimbursements whose soaring costs have triggered numerous cutbacks to providers.

The tax cut to 5 percent from 7 percent, to be phased in over the next four years, will go for new equipment and information technology to provide higher-quality care, she said.

Similarly, Rick Witowski, owner of Greenville's Sanford Rose Associates, said it will open new doors for his three-person executive recruitment firm.

"We're definitely a small business, so there are things we'll be able to invest in with that tax cut that we can't now just for financial reasons," he said.

It's not money in the owner's pocket, Witowski said.

"As for any small business, a tax cut will allow us to do more within our company," he said, most likely in software.

Frank Knapp, president of the South Carolina Small Business Chamber of Commerce, said, "Every small business is going to pay less taxes on their profits. With that money, they should be able to keep more money in their business to invest in it, help it grow and definitely help our economy."

Knapp, whose statewide Columbia-based group has sought the change for years, said it also should spur hiring by small businesses.

The legislation covers S-corporations, limited liability corporations and sole proprietorships, reducing their tax bite by 28 percent to 5 percent from the current 7 percent.

Sanford will sign the bill into law today in an 11:30 a.m. ceremony in Columbia.

It is a far cry from the $1 billion cut Sanford had sought for all taxpayers.

As he did in the 2003 and 2004 legislative sessions, Sanford had pushed for a rollback of the state top tax bracket to 4.8 percent from the current 7 percent, phased in over 10 years at a cost of $1 billion.

He contended that the economic growth it would generate — particularly from wealthy retirees — would more than offset the projected revenue loss.

The House approved Sanford's plan, but it ran aground in the Senate where members balked at the potential cost.

Some argued that passage would jeopardize the state's AAA credit rating, a view that was backed up by bond rating firms that raised questions.

The Senate dumped the House version and Sen. Hugh Leatherman, R-Florence, Finance Committee chairman, replaced it with the more modest small business tax break.

The House agreed Tuesday to that version after Wilkins told members that Sanford would sign it.

Sanford said he would continue to seek across-the-board relief for individual taxpayers.

He expressed disappointment that the Senate, with $600 million in new money available for fiscal 2005-06 in a state with the nation's third highest unemployment rate, "didn't devote a serious portion of this to tax relief for all South Carolinians."

Sen. John Land III, D-Manning, said the bill will eliminate an inequity in the state's tax system without endangering the state's fiscal health.

"If I form my law business as a pure corporation, which I have a right to do, then I pay 5 percent, but I formed an LLC, so I pay 7 percent. Tell me why is that?" Land said.

Land, a member of the Finance Committee, said the state can afford the $130 million, four-year cost "and it will have an impact on growth and jobs."

Michael Fields, state director for the National Federation of Independent Businesses, said with "this vital legislation, small-business owners are being empowered to create more jobs and invest more in South Carolina's future."

Fields said small businesses, which create nearly three of every four new jobs in South Carolina, are satisfied with the four-year implementation plan, which gives the state flexibility to manage any major budget changes along the way.

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Staff writer Dan Hoover covers politics and can be reached at 298-4883.