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Monday, February 6    |    Upstate South Carolina News, Sports and Information

Tax issue splits GOP, business

Published: Sunday, February 5, 2006 - 6:00 am


Old allies are having a falling-out.

Like the Doublemint twins, you never saw one without the other.

But in this election year, there's a growing disconnect between part of the state's business community and the Republican legislative majority.

Some business interests, often in the very strongest terms, are lobbying against a proposed tax swap that would end most local property taxes on owner-occupied homes and replace the revenue through a 40 percent hike in the state sales tax, up two percentage points to 7 percent.

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There's strong rhetoric among friends. Tough words

The influential South Carolina Chamber of Commerce has described swapping the stability of the property tax for the volatility of the economy-driven sales tax as "a recipe for disaster."

A conservative Republican has said the Chamber is led by "an oligarchy (of) self-appointed dilettantes."

Financier Darla Moore said legislators are being stampeded by their emotions when "we need to use facts and research."

But Rep. Lewis Vaughn, R-Taylors, dismisses business fears as "one of those chicken-little things."

Other Republicans contend that it's business interests that have been stampeded, or hijacked, by liberal advisers with an agenda.

Driving the Legislature are local and state tax reform groups, apocryphal tales of people forced from their homes by soaring assessments, and, finally, public hearings that greased the election-year legislative tracks that make some change almost inevitable. Political fallout?

How the issue is resolved may determine whether the breach is long or short-lived with political implications in competitive House districts.

Warren Tompkins, a lobbyist and Republican political consultant, said that "where the business community has fallen is that it continues to say this is bad for business, but they're not offering any remedies to show how we can get any help for (residential) property owners. That's been a huge mistake on the business community's part."

This comes after the 2005 session was hailed by some as the most business-friendly session in years with lawmakers approving a business tax cut and limits on lawsuits.

To Sen. Larry Martin, R-Pickens, there is a split and "it's serious," but Sen. Danny Verdin, R-Laurens, says, "I don't sense there is a breach" that can't be healed.

Rep. Dwight Loftis, R-Greenville, said he doesn't know if there's a genuine breach, "but I know citizens are crying for tax relief and most legislators are determined we're going to do what we can to give them relief."

Loftis attributed business concerns to fear of the unknown, "that a change in the tax structure will put them at more of a disadvantage than they are right now. I don't sense that the General Assembly is ignoring that. How you achieve reasonable balance is the question."

That's been one of the arguments of business opponents of the House plan, that even without the change, South Carolina companies already pay some of the nation's highest property taxes.

House Majority Leader Jim Merrill, R-Daniel Island, last year returned a $3,500 state Chamber donation to the House Republican Caucus after the Chamber earlier sent a letter to legislators that he felt tied business-friendly results to a future contribution.

The disconnect, Merrill said, is not between the Chamber's member businesses and the Legislature, but between the members and what he views as its Democratic-leaning staff.

"I don't think the South Carolina Chamber of Commerce now has enough conservatives giving them advice," Merrill said. "I think they're out of touch with what voters are telling us."

But Hunter Howard, the former Democratic legislator from Greenville who is the Chamber's president, said that with nearly 100 members on four committees having reviewed the plans, "No single person could make that kind of group do something they didn't want to do."

The Chamber isn't opposed to making any changes.

"We recognize the political aspects," he said. "We've offered a variety of things that would not shift (the burden) to business and would offer targeted relief for people who need it."

The fracas even has co-sponsors of the plan looking for a compromise that will benefit homeowners and salve the fears of business leaders, said Rep. Jim Harrison, R-Columbia, House Judiciary Committee chairman.

"The split is real," said Rep. Dan Tripp, R-Mauldin, "and I'm not sure where the fix is."

Another wild card is Republican Gov. Mark Sanford, who is likely to veto any measure that isn't revenue neutral -- that is, it doesn't take away more from taxpayers than they get.

Business leaders hit the road early last month, visiting editors and reporters at major newspapers to make their case.

At the center of the property tax debate are differing House and Senate plans to replace tax revenue from owner-occupied homes taxes with a 2-cent increase in the state sales tax.

Howard derided the plan as "emotionally driven," a business and job-killer that would scare off potential investors.

The Chamber supports a more moderate relief plan, increasing the state sales tax by 1 cent for means-based measures to target relief to those who need it the most.

"It's an election year. And we are a constituent speaking in one voice," a Chamber press release said, quoting Mack Whittle, president of Carolina First Bank and a former Chamber chairman. "We make our decisions off the facts, and we only expect the state to do the same."

But business isn't presenting a united front.

"There are two distinct business communities," says Ed McMullen, president of the South Carolina Policy Council, a conservative, business-oriented Columbia think tank.

"There is a group of self-appointed dilettantes who call themselves the business community in South Carolina, an oligarchy of a very small group of people, and then there's a larger group that's been here for decades and is the backbone of business."

The latter, he said, understand the need for property tax relief and are working with the Legislature.

Will it all become so acrimonious and fractured that nothing gets done?

"I don't want to even think in those terms," Martin said.


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