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Article published Mar 24, 2005
Sanford's tax plan struck down
COLUMBIA -- Gov. Mark
Sanford's plan to lower the state's top income tax rate took a dagger to the
heart from a Senate Finance subcommittee Wednesday afternoon.Not even a visit by
Sanford was enough to save the bill, which would have reduced the income tax
rate from 7 percent to 4.75 percent over 10 years.The subcommittee voted 6-0 to
strike the bill, which the House approved in February, and replace it with
Finance Chairman Hugh Leatherman's proposal to reduce the tax small businesses
pay from 7 percent to 5 percent over four years.Sanford -- who cancelled a trip
to Mount Pleasant with U.S. Sens. Lindsey Graham and Jim DeMint to push the plan
-- told the subcommittee that his proposal would create jobs, spur economic
investment and bring executives and wealthy retirees to the state.South Carolina
will have more than $600 million in new money to spend next year, and Sanford
said it was crucial to put that money in the hands of the taxpayers."Do 170
legislators decide how this money gets spent, or do 4 million people in South
Carolina decide how this money gets spent?" Sanford said. "I think we're better
off to let the people invest in the private sector."Sanford's plan would cost
the state nearly $1 billion a year when fully implemented, and the price tag was
a big sticking point for several committee members."My fear factor relates to
dealing with a number that big," said Sen. Scott Richardson, R-Hilton
Head.Richardson said the state has a "huge road problem," and also has to
contend with funding increases for education and Medicaid.Sen. Wes Matthews,
D-Bowman, said he had a problem with attempting to lure wealthy retirees to
South Carolina."I don't want a Hilton Head kind of economy for our state,"
Matthews said. "The Hilton Head economy has hurt the indigenous people. The only
jobs indigenous people can get are waiting tables, cutting grass or making
beds."Leatherman's bill, which reduces the income tax by a half percent a year
for four years, would cost the state about $129 million when fully
implemented.Tim Wilkes, chairman of the state Small Business Chamber of
Commerce, said Leatherman's bill would even the playing field for small
businesses. Large corporations already enjoy the 5 percent income tax rate."Most
of what has been done in the past has been geared toward large corporations,"
Wilkes said. "We're not treating fairly the strongest part of our economy."Bill
Gillespie, the state's chief economist, said that with the growth in education
and Medicaid spending, Sanford's plan would put the state in a $100 million hole
when fully implemented. Leatherman's proposal, in contrast, would leave about
$41 million to play with.The vote was a major setback for Sanford.Reducing the
income tax has been one of his top agenda items since he took office, and was
one of the issues he campaigned on.Leatherman, R-Florence, was a gracious
winner, giving Sanford credit for getting the Legislature moving on slashing the
tax."He started this debate, there's no question about that," Leatherman said.
"We just picked up on it."The question now is whether the death of Sanford's
plan is a permanent one:(bullet) The full Finance Committee takes up the bill
Tuesday and could amend it to embrace Sanford's plan. That's unlikely, however,
since Leatherman is the chairman.(bullet) The full Senate could alter the bill
when it gets its shot. Again, that's doubtful because 37 senators signed on as
Leatherman's co-sponsors.(bullet) House members could reinstate Sanford's plan
when the bill is sent back to them. Speaker David Wilkins, R-Greenville, said
it's too soon to say how the House will respond.Wilkins said he's just glad to
see the bill advance."I still prefer the House bill, but this is a step forward
for the Senate," Wilkins said. "Last year we sent it to them and had no
movement. To take the House bill as the vehicle, modify it and still have an
income tax reduction is a positive."Robert W. Dalton can be reached at 562-7274
or bob.dalton@shj.com.