House Panel Approves Tax Cut for Small Businesses

House Panel Approves Tax Cut for Small Businesses

Published on March 23, 2012

By Adam Beam | The State

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A House panel in the S.C. Legislature Thursday approved a $59 million-a-year tax cut for small business owners.

The bill – one of seven tax reform bills that House Republicans hope to pass this year – would cut the tax rate that small business owners pay on their profits.

The business tax applies to smaller companies and is different from the state’s corporate income tax, which affects big companies. Now, a S.C. small business owner at the end of the year pays taxes on whatever profit his company has made. The owner can pay the taxes at his or her individual state income tax rate – anywhere from 3 percent to 7 percent, depending on their income – or pay the 5 percent rate for small business owners.

The proposal endorsed by a House subcommittee Thursday would cut that rate to 3 percent. That would affect 58,884 of the 2.1 million people in South Carolina who file state tax returns, less than 3 percent, according to the state Board of Economic Advisors.

It is not the first time that lawmakers have been asked to cut the small business tax. In 2006, lawmakers voted to cut it to 5 percent from 7 percent.

“We just want parity with big business,” said Frank Knapp, president and chief executive of the S.C. Small Business Chamber of Commerce.

Big businesses in South Carolina are taxed at 5 percent. But House Republicans have introduced a bill that would eliminate that tax over a four-year period.

The proposal is the fourth tax reform bill that House subcommittees have approved this week, including:

• A bill that would consolidate South Carolina’s six personal income tax brackets into two. About 78 percent of state taxpayers would pay less or see no change in their taxes. The remaining 22 percent – among the state’s poorest residents – would see a tax increase, up to $84 a year.

• Two bills that would lower property taxes for businesses. The move would save businesses more than $1 billion but come at the expense of local governments – cities, counties and school districts – who depend on that income to operate.

Those proposals – and the lower small business tax – are scheduled to be discussed by the full House Ways and Means Committee next week. From there, the proposals will go to the full House and, if passed, the state Senate. Passage there and Gov. Nikki Haley’s signature would make them law.

Two other tax bills – eliminating the corporate income tax and eliminating two-thirds of the state’s sales tax exemptions – have not had a subcommittee hearing yet.

Original article: http://www.theitem.com/news/house-panel-approves-tax-cut-for-small-businesses/article_1ad1b408-74eb-11e1-82a3-001871e3ce6c.html