COLUMBIA - The Senate Finance Committee wrestled with tax-cut plans in a three-hour session Tuesday, trying to get some background before sending the measures to subcommittees for more intensive review.

State economist Bill Gillespie was lukewarm toward a proposal to cut the top income tax rate, saying it has no built-in elasticity to rise with inflation.

Tax expert Holley Ulbrich of the Strom Thurmond Institute at Clemson University said most of the proposals are unfair because they place more of the burden on lower-income people.

Tom Davis, a top aide to Gov. Mark Sanford, argued for the income tax cut that easily passed the House.

The governor's top priority is economic development and job creation, and the tax rate is standing in the way, Davis told the committee.

The tax rate keeps top corporations away because their executives and many employees would see a tax increase, Davis said.

It also is "a fundamental equity issue here" that two-thirds of those who pay the top tax rate of 7 percent are small-business owners, yet large corporations are taxed at 5 percent.

He said the state's top rate is fifth in the country and the highest in the Southeast.

Sanford wants to come closer to the Southeastern average of 4.48 percent, Davis said.

He also said the so-called three-legged stool of state revenue based on income, sales and property taxes is wobbly because sales taxes are 27th in the nation and property tax revenues are 14th.

Gillespie has said the tax cut would cost $1 billion.

But "that billion doesn't just vanish," Davis said. People will spend the money, and many business owners will use it to hire more people or buy equipment, he said.

Sen. Verne Smith, R-Greer, said income tax rates are no more than "a little twinkle" to business owners. Smith said that in many years as a business owner, he never gave the income tax rate much thought.

Davis said state officials who have been involved in recruitment have been told by companies that the tax rate deters them from locating here.

Ulbrich said the three-legged stool is not wobbly. The taxes are based on ability to pay, and income is an indicator of that, she said.

The proposed changes would make some regressive taxes even more regressive, Ulbrich said.

It is not a good policy to cap property taxes because a handful of poor people live in high-value areas, she said. Instead, the state should find an income-based way to tax people.

The tax caps and sales tax proposals will be more regressive because they do not apply to rental property, Ulbrich said. That means people who rent will pay a higher proportion of property taxes than homeowners.

She also warned that adding sales tax "might affect our competitiveness in regards to tourism" because many tourism areas, including Horry County, already have tacked on hospitality taxes.

Sen. Hugh Leatherman, R-Florence, chairman of the Finance Committee, said he will appoint subcommittees to study the measures.