Economist: S.C. tax cut aids less than half

COLUMBIA - More than half of S.C. taxpayers would get virtually no relief from an income tax cut proposed by Gov. Mark Sanford and state House members, the state's chief economist said Tuesday.

Bill Gillespie said 51 percent of taxpayers - many of them low-wage or part-time workers - would save a few dollars a year at most under a bill before the House now.

The tax break would benefit the wealthiest South Carolinians most. About 25 percent of the savings would go to the top 1.7 percent of filers, he said.

South Carolina's top tax rate of 7 percent applies to everyone earning more than $12,000. Because taxpayers at the top of the scale pay more in taxes, they would see a larger return from a cut.

Gillespie told observers and legislators about the tax break moments after members of a House subcommittee approved the bill. Even supporters of the bill were dismayed at the news that the cut wouldn't help the poorest taxpayers.

"We still need to do more," said Rep. Shirley Hinson, R-Berkeley, a subcommittee member. "The income tax bill is not what's going to help citizens at that level."

And at least one co-sponsor is reconsidering his support.

Rep. Bill Clyburn, D-Aiken, said he's concerned the poor won't see a benefit.

"If it's not going to benefit the majority of South Carolinians, then I have some issues with that," Clyburn said.

A Sanford spokesman defended the bill, saying small-business owners and others will be able to pocket the money. That will stimulate the economy and create jobs to help the poor, said Sanford spokesman Will Folks.

"If someone who currently doesn't have a job gets one as a result of small-business growth and expansion in our state, that's a pretty clear benefit," Folks said.

The bill would reduce the income tax to 4.75 percent from 7 percent over 10 years. The cuts would come only in years in which the state Board of Economic Advisors predicts state revenues will grow by 2 percent or more. The state would lose $959 million in tax revenue in 2014, the first year the plan could be fully implemented, Gillespie said.

Sanford, House Speaker David Wilkins, R-Greenville, and other supporters have promoted the tax cut as a way to spur the economy.

But Clyburn was surprised to learn that taxpayers whose federal taxable income is less than $12,000 would get almost nothing from the reduction.

"My district has an average household income of $12,800," Clyburn said. "... It's not helping the people who need the help the most."