State Senate OKs income tax cut

COLUMBIA -- The state Senate on Wednesday approved a plan to reduce the state's top tax rate. It just wasn't the plan that Gov. Mark Sanford wanted.

The Senate gave second reading to a bill that would cut the state's top rate for small businesses from 7 percent to 5 percent over four years. When fully implemented, the plan would cost the state about $129 million.

Sanford had proposed reducing the rate to 4.75 percent for everyone, cutting it by .225 percent each year the state's Board of Economic Advisors predicted revenue

growth of at least 2 percent. Sanford said his proposal would spur capital investment and attract executives and wealthy retirees to the state.

The House approved Sanford's plan, which would have cost the state about $1 billion when fully implemented in 10 years. The Senate stripped that bill in favor of its own, which was sponsored by Finance Committee Chairman Hugh Leatherman.

After an attempt to restore the House version of the bill, the Senate plan passed on a voice vote.

Sen. John Hawkins, R-Spartanburg, called the Senate version a move in the right direction.

"I had hoped we would have passed the governor's plan, which would have done more to stimulate growth and investment," Hawkins said. "But I'm comfortable with what we passed. Any tax cut we can have is a good thing."

Sen. Jim Ritchie, R-Spartanburg, said the plan will create economic energy for small businesses and could lead to further reductions.

"It's a good targeted effort at a sector of our economy that needs the most help," Ritchie said. "If successful it will pave the way for more broad-based tax cuts."

After third reading today, the bill heads back to the House.

The House could concur with the changes and send it to Sanford's desk, or it could amend it to its original form and take it to a conference committee, said Speaker Pro Tem Doug Smith, R-Spartanburg.

"The good news is that we're talking about a tax reduction," Smith said.

Sanford spokesman Will Folks said that is good news. But he said Sanford would continue to push for his plan.

"Given that we've got the third highest unemployment rate in the country, we've got to look at as broad an economic stimulus package as possible -- one that hits on more, not less economic activity," Folks said. "In addition to leveling the playing field for small businesses, we need to be encouraging growth in all sectors of our economy."

Robert W. Dalton can be reached at 562-7274 or

bob.dalton@shj.com.

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