Tax plan is moving

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Gov. Mark Sanford's proposed income reduction plan won easy approval before the House Ways and Means Committee this week, and it likely will clear the full House, too. Before the bill gets to the state Senate, where the battle will be much tougher, the governor and other supporters of this tax cut need to sharpen their message about the benefits for small businesses in South Carolina.

The message about what this plan would mean for small businesses has been lost in this debate. So far, the opposition has focused on the usual suspects: the higher-income individuals who pay most of the taxes and therefore, as might be expected, would receive more of their money back if state income taxes are reduced.

A cut in the income tax could spark spending in South Carolina, and that would be a good thing. But also, more importantly, it could create a healthier environment for the small businesses that employ so many people and are so important to our state's economy.

South Carolina's top tax rate of 7 percent kicks in on $12,300 of taxable income. That's high. Small businesses also pay that rate, unlike corporations that are taxed at 5 percent. Walk into any business that employs about 20 people, and the owner is probably paying the 7 percent income tax. That's a disincentive for small businesses that often are already operating at a slim margin.

Sanford's income tax reduction plan is sensible in its approach and modest in its immediate impact on the state budget. The tax cuts are phased in over at least a decade, and the .225 percent tax rate cut won't happen in years in which states revenues fail to grow by 2 percent.

This is the right tax for the Legislature to cut. It will return money to individuals who pay too much in income tax, make this state a more attractive place for small businesses and position our state to improve its economic base. Those arguments need to be made forcefully in coming weeks.