Sanford, Senate’s income tax plans set for clash

Sanford, Senate’s income tax plans set for clash

By JIM DAVENPORT, The Times and Democrat

March 22, 2005

Gov. Mark Sanford’s plan to cut income taxes is expected to fail this week as it competes for votes in a Senate subcommittee with a bill that has much broader support.

Sanford’s centerpiece legislation calls for the state to reduce its top income tax rate to 4.75 percent from 7 percent over a decade. Mr. Sanford says his plan, targeting small businesses and wealthy executives and retirees, would spur the economy.

The proposal would ultimately mean that the state collects $1 billion less in taxes than it would if there were no break. It cleared the House last month and now is in the Senate Finance Committee.

Thirty-seven senators have signed onto a bill by Finance chairman Hugh Leatherman that lowers income tax rates small business owners pay to 5 percent from 7 percent. They now miss out on the lower rates that corporations enjoy. It would be implemented in four years and cost about $100 million.

Correcting the disparity in what smaller businesses pay has drawn support.

“It’s just not fair,” Senate Minority Leader John Land, D-Manning, said.

The South Carolina Small Business Chamber of Commerce has been pushing the tax cut for five years. While “it is not as comprehensive as the governor’s proposal, it does address an issue we’ve always been championing – that’s parity with big business,” said Frank Knapp, the group’s president.

Knapp said he also would be satisfied with Sanford’s proposal.

But the governor’s plan is tied to economic growth. That means reducing the tax rate could be prone to “stops and starts and sputters,” Land said. “It is an accounting nightmare. You don’t know if you’re going to get it or not.”

The bill proposed by Leatherman, R-Florence, is “responsible. It’s affordable and it doesn’t incapacitate government,” Land said.

Legislators are reluctant to embrace a plan that is ultimately going to cult $1 billion from state revenues. Sen. Scott Richardson, R-Hilton Head Island, said. “The sense of the Senate is to take it a little bit slower on this,” he said.

But Richardson also wants a bit more. He’d like to see a plan to eliminate income taxes for people older than 65 added to Leatherman’s proposal. “If you get tax friendly to retirees, they will move to your state and boost the economy,” he said.

Land and Richardson- both on the subcommittee considering the legislation – say they expect the House version of the bill to be gutted and replaced with Leatherman’s small business break. “That’s very likely,” said Sen. Wes Hayes, R-Rock Hill and the panel’s co-chairman.

Hayes, however, wants more information about how each plan will affect tax collections. “Once you do, it’s very hard to go back and undo it,” Hayes said.

Sanford is not about to give up, his spokesman Will Folks said. “You can bet that he’s going to be incredibly active on this front,” he said.