By Scott Miller
smiller@scbiznews.com
Published Dec. 10, 2008

The S.C. Chamber of Commerce said the tax reform Gov. Mark Sanford proposed Tuesday does not go far enough.

The nonpartisan Tax Foundation, meanwhile, said Sanford’s tax policy will create a better business climate and boost economic development, despite the elimination of several tax incentives aimed at luring new businesses.

The state would give up some ability to focus its efforts on certain industries, but, overall, all industries would benefit from Sanford’s plan, said Josh Barro, a staff economist at the Washington, D.C., research group.

On Tuesday in Greer, Sanford introduced a plan to phase out the 5% corporate income tax during a 10-year period and replace the lost revenue by eliminating certain tax exemptions and other incentives designed to lure businesses to South Carolina.

On Wednesday, Berkeley County Supervisor Dan Davis said the lack of state tax incentives for business would hurt local job-recruiting efforts.

“We just would not be competitive,” Davis said, speaking at an event hosted by the Charleston Metro Chamber of Commerce. “(Companies) wouldn’t even make a whistle-stop in South Carolina.”

Nancy Whitworth, economic development director at the city of Greenville, said losing the incentives could hurt some economic development efforts, because the state must compete with neighboring states that offer incentives.

Tax incentives aren’t the only reason companies locate here, however, Whitworth noted. And eliminating the corporate income tax would make the state more attractive to businesses, she said.

That’s Barro’s stance. He said 0% corporate income tax is more valuable than any other tax incentives that often target specific industries.

“It’s saying we want the hydrogen industry here in South Carolina, and we’re going to give you a tax credit. … You hear the announcements of those companies locating here because of the credits. What you don’t see is the jobs lost because of the high tax burden,” he said. “We encourage states to get out of that business. While South Carolina would be giving up the opportunity to lure specific industries, it would create a low corporate tax burden, which would be attractive to all industries.”

Sanford’s other proposals include a $3-per-ton tipping fee for landfill dumping and elimination of the state’s sales tax holidays.

Sanford also reiterated his call for an option flat income tax rate of 3.65%, down from the current 7%, for any individual who decides not to take tax deductions.

He also wants to raise the tax on cigarettes from 7 cents to 37 cents a pack to help offset the loss of revenue from his other tax proposals.

The state chamber, however, said the money should support health care and provide premium assistance for individuals and small businesses.

In a statement released Tuesday, chamber President Otis Rawl Jr. commended several of the governor’s proposals but said more should be done, including “examining inequities in the current property tax structure that adversely impact businesses.”

Sanford wants to set up a committee to do so.

Rawl also said a larger tax overhaul is needed.

“South Carolina, like the rest of the nation, is experiencing a difficult time in today’s economy, but we are placed at an even larger competitive disadvantage because of past piecemeal approaches to tax reform,” Rawl said. “These piecemeal approaches have created shortfalls in South Carolina’s budget and ultimately harmed the state’s economy, increase job losses and negatively impacted everyone’s pocketbook.” 

“Pieces of Governor Sanford’s proposal should be considered as part of an overall comprehensive tax reform plan,” he said.