Sanford agrees to small-business tax break

By Jim Davenport, Associated Press

April 13, 2005

COLUMBIA, S.C. (AP) – Gov. Mark Sanford has decided to go along with a pared-down income tax break and a potential showdown on one of his top political goals. House Speaker David Wilkins told the House on Tuesday that Sanford would rather have a break-benefitting small-businesses owners than run the risk of getting no income tax reduction at all.

“I’m always more of a get-a-bird-in-the-hand kind of thing,” Wilkins said.

Sanford wanted to reduce the state’s top personal income tax rate to 4.8 percent from 7 percent during the next decade. Sanford argued economic growth would more than cover the cost of a proposal intended to help small business owners while attracting wealthy retirees and executives.

That plan sailed through the House, but sank in the Senate, where the $1 billion price tag caused concern.

“What really did his plan in was concern about the Triple-A credit rating,” Sen. Harvey Peeler, R-Gaffney, said. Two bond-rating agencies had questioned the effect of the lost revenue on the state’s financial health.

The Senate replaced Sanford’s proposal with a break targeting small-business owners. The legislation now reduces income taxes to 5 percent for sole proprietorships, partnerships, limited liability corporations and businesses filing under subchapter S of the tax code, or so-call S-Corps. It would take four years and cost $129 million to fully implement.

“This sets up small business to reinvest some of their profits in their businesses and can inspire other people, hopefully, to go into small business,” said Frank Knapp, president of the South Carolina Small Business Chamber of Commerce. Knapp’s group has pushed the tax cut for years in an effort to reduce small-business tax rates to the same level large corporations use.

Last week, House leaders were leaning toward standing by Sanford’s plans and sending the legislation to a conference committee to work out differences with the Senate. And Sanford’s office has said repeatedly that the governor would continue fighting for the broader tax cut.

If the House had insisted on Sanford’s proposal, there were no guarantees what would happen with the tax break. “I don’t think we ought to take the risk of going to conference and perhaps never getting to vote on it,” Wilkins said.

“The governor ha told me that he wants us, and asks us, and would I please convey to you, his wishes that you concur” with the Senate version, Wilkins told the House on Tuesday.

If representatives want to offer a new bill on income tax reduction, they can do that. But lawmakers have been more interested lately in property tax changes, Wilkins and Peeler said.

With a May 1 deadline for bills to cross between the House and Senate, there’s little time this year to get other tax bills out of the Statehouse. Still, Wilkins said, the House could approve a property tax bill and have it ready for the Senate to take up next year.

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