By Scott Miller
Staff Writer

Between the debates on immigration reform, state lawmakers are poised to tackle everything from movie making to taxing and spending.

Lawmakers prefiled 172 bills in the House and Senate in December, covering fire sprinkler installation, group health insurance, property tax reform and a myriad of other issues.

Gov. Mark Sanford, meanwhile, dug in for another battle over tax reform. He wants an income tax cut coupled with a 30 cents-per-pack increase on cigarettes, a goal that fell short in the past.

State spending remains a real issue as well, with legislative leaders, along with Sanford, looking to cap appropriation increases at the rate of population growth plus the rate of inflation.

Taxing

Sanford has tried to cut income taxes in the past. His latest proposal calls for a flat tax rate of 7%, or 3.4% for people who choose to forego deductions.

The measure would cost the state about $107 million, based on Sanford’s estimate. So in tandem, the governor wants to raise the cigarette tax to 37 cents a pack. The state has the lowest rate in the nation at 7 cents per pack.

But the proposal drew critics who said swapping income tax cuts for higher cigarette taxes would push the tax burden onto low- and middle-income residents.

“All of the benefit is going to go to the top 20% of income earners in the state,” said John Ruoff, director of South Carolina Fair Share. “We support increasing the cigarette tax but we think those dollars should advantage the low- and middle-income folks by funding health care programs.”

Sanford said the income tax cut is needed to improve the state’s competitiveness for new jobs and investment.

Only eight states have a higher income tax rate than the Palmetto State, according to figures from the Federation of Tax Administration.

Those states, however, use tax brackets so the higher rates only apply to higher incomes.

Iowa, for example, has one of the highest tax rates at 8.98%, but only people earning more than $60,436 pay such a high rate. In South Carolina, anyone earning at least $12,850 a year is taxed at the 7% rate.

Sanford won’t support increasing the cigarette tax, or any tax, without an equal tax cut somewhere else.

Spending

That effort to raise cigarette taxes stumbled last year, as the state anticipated a budgetary surplus.

Several lawmakers said raising taxes during times of financial prosperity is wrong.

This year, the outlook isn’t quite as positive, which has some lawmakers shifting focus to state spending. 

Sen. President Pro Tem Glenn McConnell, R-Charleston, said the only way to curb lawmakers’ appetite to spend is through a constitutional mandate.

“The political pressures are too great unless there is a constitutional bridle in the process,” said McConnell, who introduced a constitutional amendment to limit spending increases to the percentage of population growth plus the percentage of growth in personal income.

Sanford supports the measure, saying spending should not surpass the income growth of citizens, and other lawmakers have proposed similar measures.

The business community appears split on the issue. Jay Ragley, state director of the National Federation of Independent Business, said the cap would force the state to analyze the effectiveness of older programs. “History has shown that they’re never willing to get rid of useless and outdated programs,” he said.

But Mary Graham, senior vice president of public policy for the Charleston Metro Chamber of Commerce, suggested useful government services could fall to a spending cap. 

Lawmakers should shift focus to tax reform, not spending reform, she said.

“We’ve got to figure out a way that everyone is paying their fair and equitable share,” Graham said.

Prefiled bills

Lawmakers prefiled 172 bills in the House and Senate in December. Here’s a sneak peek of what’s on tap:

• Senate bill 860, filed by Sen. President Pro Tem Glenn McConnell, R-Charleston, would provide tax credits to commercial property owners who install fire sprinkler systems. The measure also provides insurance discounts and prohibits water companies from charging additional “tap on” fees for sprinklers. www.scstatehouse.net/sess117_2007-2008/bills/860.htm.

• Senate bill 921, introduced by Sen. David Thomas, R-Greenville, would mandate fire sprinklers in all commercial and industrial buildings and would create tax credits for the installation. www.scstatehouse.net/sess117_2007-2008/bills/921.htm.

• Senate bill 902, introduced by Sen. Luke Rankin, R-Myrtle Beach, would create a legislative study committee to consider expanding property tax relief under a 2006 act that swapped property tax revenue with a sales tax increase. www.scstatehouse.net/sess117_2007-2008/bills/902.htm.

• Senate bill 588, introduced by McConnell, would revamp the requirements for small businesses to form and join group health insurance cooperatives, so employers could join regardless of health status or claims experience, among other changes. www.scstatehouse.net/sess117_2007-2008/prever/588_20070508.htm.

• Senate bill 878, filed by Sen. Chip Campsen, R-Isle of Palms, would provide income tax credits, rather than just corporate tax credits, to companies creating jobs and new investment in the state. www.scstatehouse.net/sess117_2007-2008/bills/878.htm.

• Senate bill 859, filed by McConnell, would increase incentives for motion picture companies to film in South Carolina. If approved, the state could offer $15 million in tax rebates to film companies rather than the current $10 million. www.scstatehouse.net/sess117_2007-2008/bills/859.htm.

• House bill 4358, introduced by Rep. Todd Rutherford, D-Columbia, would establish sales tax exemptions on building materials used on affordable housing developments. www.scstatehouse.net/sess117_2007-2008/bills/4358.htm.

Scott Miller is a staff writer with the Business Journal. E-mail him at smiller@setcommedia.com.

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