South Carolina Gov. Mark Sanford and top Republican lawmakers have agreed to a legislative proposal that would gradually reduce the state's income tax over the next 10 years, legislators said Monday.
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The yearly cuts, however, will take place only if state revenues increase by a minimum of 2 percent annually.
The income tax reduction bill, the centerpiece of Mr. Sanford's revenue reform plan, is expected to be unveiled today.
Instead of being included in the annual budget bill, the legislation will stand alone in bills that will be introduced in both the House and Senate, legislators said.
From the current rate of 7 percent, the bill would reduce South Carolina's income tax to 4.75 percent in a decade, said state Sen. Greg Ryberg, R-Aiken.
Tying that reduction to a minimum growth in state revenue ensures the state's fiscal crisis won't be made worse by the proposed bill, Mr. Ryberg said. That was a key concern of legislators who favored the idea but questioned its timing. South Carolina faces a budget shortfall between $350 million and $500 million this year.
"Income has to grow in order for this to kick in," Mr. Ryberg said. "It gives us the fail-safe."
Reducing the state income tax will stimulate economic growth in South Carolina much like President Bush's tax cut was a catalyst for the nation's economic turnaround, the senator said.
However, Democratic legislators say an income tax cut must take a back seat to fully funding public schools and Medicaid.
"We've got to talk about education and Medicaid before we talk about cutting state revenues," said state Sen. Tommy Moore, D-Clearwater. "The letter of the law and the expectation of the people of South Carolina is to fully fund education for school children. Until we do that, how can we talk about reducing revenue in this state?"
Instead of an across-the-board income tax cut, Mr. Moore said he favors targeted reductions similar to those in his unsuccessful tax proposal of last year. Under that plan, those with incomes of $15,000 or less would be exempt from state income taxes, while small businesses would pay 5 percent instead of 7 percent.
"If you're talking about real income tax reform, let's talk about small businesses and people making $15,000 or less," Mr. Moore said.
Will Folks, Mr. Sanford's press secretary, would not comment on the subject of the press conference and the proposed legislation.
Reach Jim Nesbitt at (803) 648-1395 or jim.nesbitt@augustachronicle.com.
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