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THURSDAY, FEBRUARY 03, 2005 12:00 AM

House OKs tax cut after heated debate

Bill would affect top income tax bracket

BY MATTHEW MOGUL
Of The Post and Courier Staff

COLUMBIA--The state House of Representatives passed Gov. Mark Sanford's income tax reduction Wednesday but not before the debate morphed into a full-blown discussion of something else -- property taxes.

It was a strategy by Democrats to waylay Sanford's proposal. It didn't work. The Republican majority in the House pushed the bill through with help from a handful of Democrats by a margin of 73-39.

It's the second of the governor's top agenda items to get the go-ahead in two days. On Tuesday, the House passed a portion of Sanford's government restructuring plan.

The bill now goes to the Senate, where it was filibustered to death last year. Senators said it's too early to determine the prospects.

The plan would scale the state's top income tax bracket from 7 percent to 4.75 percent over 10 years, with the cuts coming only in years in which revenue is forecast to climb by at least 2 percent.

State economists estimate the cut would cost South Carolina $6 million in the first year. After a decade, the price tag would reach $959 million a year.

Supporters say the cuts will stimulate the economy enough to replace the lost revenue.

Opponents railed against the proposal. During nearly six hours of House debate, in which Democrats did most of the talking, the topic was whether cutting property taxes would be preferable.

Most agreed it would. The refrain from lawmakers on both sides of the aisle was that "people back home" cared a lot more about property taxes. That was about all the two sides agreed on. At times the back-and-forth got acrimonious.

Democrats argued that Sanford's plan was wasteful and would hurt generations to come.

"This body is going about things like that song, 'Don't Worry Be Happy,' " said Rep. Gilda Cobb-Hunter, D-Orangeburg. "This bill will create a deficit for this state ... and will be creating debt for your children and your grandchildren."

Supporters said the money would create jobs and make the state more attractive for small businesses and wealthy retirees.

Rep. Bobby Harrell, R-Charleston, said it was only the first step and that property tax soon would be on the table. He called the Democrats' concerns "disingenuous."

The Democrats, he said from the floor, are "proposing amendments with the goal of killing this bill and depriving taxpayers of this state needed tax relief."

Democrats proposed more than 25 amendments, most aimed at lowering property taxes and boosting education funding. Only a few minor amendments made it through, including a pledge to protect funding to law enforcement.

The emphasis on the top tax bracket didn't go over well with Democrats such as former Minority Leader James Smith, D-Richland. He called the bill a "leave-no-millionaire-behind" plan.

That's because the cuts would not affect half of the state's taxpayers, according to a study by the advocacy group South Carolina Fair Share. The wealthiest 18 percent would garner 81 percent of the benefits, the liberal-leaning group says.

"Everyone is convinced that tax cuts are wonderful. This is a tax cut. So it must be wonderful," said R. Thayer Rivers, D-Beaufort.

Rivers said income tax is a side issue. "Do you know that a $20,000 truck in my county will cost double the taxes than in Charleston?" Rivers said. "Property cuts will go out to way more people and do much more for this state."

Rep. Shirley Hinson, R-Goose Greek, said Rivers and the other Democrats were missing the point.

"What we are hearing today from the Democrats about property taxes is absolutely right. Less than 50 percent of taxpayers will see a difference in their paychecks," Hinson said. "But this is about economic development and what's needed to drive the economy."

Backers pointed out that small businesses typically pay at the top 7 percent level. Big corporations pay 5 percent.

"Income tax relief is all about leveling the playing field for small businesses and making our state more competitive in attracting jobs and capital investment," Sanford said in a statement congratulating the House.

Speaker David Wilkins, R-Greenville, took the floor to speak -- something his chief of staff said he does only once or twice a year.

Wilkins didn't mince words, calling the Democrats "Johnny Come Latelies," saying the Republicans have been advocating property tax relief for years.

He then entered into a sharp exchange with Minority Leader Harry Ott, D-Calhoun.

"If you are so concerned, then where are all the bills? How come you haven't submitted any bills?" Wilkins asked Ott in an uncharacteristically muted House. "This is about income tax, and you are trying to make it about property tax."

Ott's replied that it was "irresponsible" for Republicans to ramrod through such important legislation just three weeks into the new session.

The Senate outlook for the proposal is problematic, lawmakers said. Sen. Vincent Sheheen, D-Kershaw, said he intends to offer suggestions that range from reducing property taxes to hiking a sales tax on nonessential items.

Senate Finance Chairman Hugh Leatherman, R-Florence, said he will send the bill to a subcommittee where lawmakers will study its impact. He said he has been disappointed with faulty financial projections.

"I want to make sure this time we know and do what is sound," Leatherman said.


This article was printed via the web on 2/3/2005 2:20:21 PM . This article
appeared in The Post and Courier and updated online at Charleston.net on Thursday, February 03, 2005.