GOP leaders push tax cuts as job magnet

Kathleen Wilch, a professor at Bob Jones University, gets advice on tax software from assistant manager Marty Bull at Office Depot on Wade Hampton Boulevard Tuesday night. Staff/Owen Riley Jr. e-mail this story Related Related stories: • Cuts met with enthusiasm, skepticism

Gov. Mark Sanford said the proposal to cut the top income tax rate to 4.75 percent from 7 percent with .225 percent annual reductions over 10 years represents "a united front to create jobs, stimulate capital investment and raise income levels throughout South Carolina."

Sanford said, "It's real money in somebody's pocket."

Danny Braswell, spokesman for the state Revenue Department, said a family with a taxable income of $25,000 a year would save $29 if the Sanford-Wilkins plan was fully implemented.

House Speaker David Wilkins, R-Greenville, said, "We're here talking about raising the standard of living for all South Carolinians by creating jobs and opportunity and growing the economy."

Wilkins predicted the bill would win House approval in March. But it faces an uncertain fate in the Senate where Democrats are largely united in opposition and a number of Republican senators have said the legislation is ill considered.

Rep. Joe Brown, D-Columbia, said a Democratic alternative bill addresses rapidly rising property taxes "that are really hurting people; the income tax has not been the problem."

The Democrats' tax relief bill, sponsored by Rep. Vida Miller, D-Pawleys Island, would limit quadrennial property tax reassessment increases on residential property to 15 percent.

Miller said her bill would especially aid those in counties with high reassessment increases, such as Greenville, where she said Realtors report that reassessments during the past five years rose more than 27 percent for more than half the homeowners.

Some coastal homeowners have seen increases of 150 percent she said. And homes owned by families for generations have been lost "in record numbers" because of high reassessments.

She said the bill, unlike Sanford-Wilkins', would go into effect immediately and help even the unemployed who don't pay income taxes but own property or rent.

"In my four terms up here, I have never had a complaint about income taxes," she said. "I have had many complaints about the rising property taxes. This is a problem that is affecting the whole state."

The Republican plan comes against a backdrop of a Legislature grappling with another huge budgetary shortfall, this time for $350 million, although there are signs of a revenue upturn.

But Democrats said the GOP's bill would shatter already battered state services and provide huge benefits to the wealthy while average taxpayers would barely notice the difference in their paychecks.

If passed by the Senate and signed by Sanford this year, the cuts would take effect July 1, 2005.

Rep. James Smith, D-Columbia, the House minority leader, said that for the average family it means "you might be able to buy a couple of extra cases of Coca-Cola a year."

Smith said the tax cut was "just something to throw out to distract us from these massive job losses" of the last three years.

John Crangle, executive director of the state chapter of Common Cause, an organization that promotes campaign finance reform, said the Wilkins-Sanford bill "is a political payoff to rich campaign contributors."

Under the legislation, the tax rate would drop .225 percent a year — when revenue growth is 2 percent or more.

Both sides claimed broad support in the 124-member House.

Wilkins said 90 members, including about 15 Democrats, had signed the GOP bill and Smith said 80 had signed the Democratic bill. That would mean that a number of legislators signed both.

Brown said that "once it became clear the governor's legislation doesn't address the basic needs of the people, a number of (House members) switched" to the Democratic bill.

But Christy Cox, Wilkins' spokeswoman, said she knew of no defections.

The GOP legislation is a far cry from the total elimination of the state income tax that was the signature issue of Sanford's 2002 election campaign.

"This should put to rest once and for all any notion that our governor and legislators don't work well together," Wilkins said.

Some lawmakers grumbled during 2003, Sanford's first year as governor, that he failed to adequately communicate with them and submitted his agenda late and in piecemeal fashion. Sanford emerged from that session with little to show.

Sanford said the bill, which was filed just after the joint press conference with Wilkins, is the first and most important step "toward tax relief that's targeted specifically at improving our underlying business climate and making us more competitive as a state."

Rep. Bobby Harrell, R-Charleston, chairman of the tax-writing Ways and Means Committee, described the bill as "the engine that will fuel economic growth for the next decade."

Sen. John Courson, R-Columbia, said the bill "has merit" and pledged his support and that of Sen. Glenn McConnell, R-Charleston, that body's majority leader.

But Democrats said it was a 10-year, $800 million raid on the budget that would place new financial burdens on local government as state revenues contract with the outflow.

Sanford and Wilkins said the tax cuts would spur business growth that would generate revenue that would more than offset that loss to rate cuts.

Smith distributed a financial analysis that predicted an $850 million revenue drop from a 2-percentage point decline in the income tax.

With the income tax representing 42 percent of all state revenue, "any change in the law would have substantial impacts on total state revenue collection," according to the report.

The report also contended that South Carolina has "a relatively low tax burden," 37th among the 50 states in a U.S. Tax Foundation study.

Sanford and Wilkins said revenue reductions would be offset by new funds generated by the stimulus to small business.

"Globalization has changed the world," Sanford said. "It's vital that we become more competitive as a state in attracting small business."

Sanford acknowledged three consecutive years of employment declines, unprecedented since the Great Depression. He said it was "an astounding jobs problem."

The governor produced charts showing that Florida, which has no income tax, and Georgia and North Carolina, which have 6 and 7 percent rates, respectively, experienced net job growth from 1998-2002 while South Carolina experienced net losses in employment and business creation.

Staff writer Tim Smith of the Capital Bureau contributed to this report.

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