The State (Columbia, SC)
November 23, 2003 Sunday
HEADLINE: Income tax relief key to creating jobs
BYLINE: By MARK SANFORD; Guest columnist
Would South Carolinas economy be better off today if wed added 3,540 small businesses over the past four years (like Georgia) instead of losing the 3,629 small businesses we lost over that same period? Would our economy be better off today if our net employment growth over the past four years had been 12.7 percent (like Floridas) as opposed to the negative 2 percent we experienced? Would our personal income levels be higher? Would the state have more revenue on hand to fund core needs such as education or Medicaid?
Or, speaking to the 144,000 South Carolinians currently looking for work, wouldnt your quality of life be better if you had a job and didnt have to consider moving to a state such as Georgia, where the unemployment rate is a full 2 points lower than ours?
I believe the answer to each of these questions is a resounding yes. Unfortunately, unlike what theyre experiencing in Georgia (where the income tax rate is 6 percent) or Florida (where there is no income tax), job growth and small business growth here in South Carolina continue to be held in check by what is effectively the highest income tax in the Southeast and the fifth-highest income tax in the nation.
Simply put, we have a profound jobs and economic development problem in South Carolina that gets even worse every day we fail to address the profoundly anti-competitive income tax climate that exists in our state.
Two weeks ago Commerce Secretary Bob Faith and I joined some friends in Greenville for the groundbreaking of the new auto research park a huge economic development project that includes corporate partners such as BMW, IBM and Microsoft. Given that the research park is, in effect, planting a seed for our state in an emerging, high-tech marketplace, my question is this: How do we improve the underlying soil conditions for economic activity in South Carolina so that were not only maximizing opportunity for the BMWs and Microsofts of the world, but also filtering that opportunity down to the thousands of small businesses that form the backbone of our economy?
Our Jobs and Economic Growth plan does that. Along with a host of other pro-business ideas ranging from workers compensation reform to health insurance cost containment to small business regulatory reforms our plan would most improve the underlying business climate in our state by immediately reducing the income tax rate from 7 percent to 5.9 percent.
Why is income tax relief so important to our states economic future? In addition to the impact it has on growing small businesses referenced earlier, Ill give you three more reasons:
* Income tax relief is a key building block in creating jobs. During the 1990s, states that lowered their income tax rates experienced three times the job growth of states that raised income taxes. For example, when New Jersey lowered its income tax rate from 7 percent to 5.7 percent, 25,017 new jobs were created. On the other hand, when Massachusetts was considering a 1.2 percent increase in its income tax, economic models showing 117,029 lost jobs kept the state from doing so.
* Income tax relief will stimulate economic activity. This is clearly something were seeing at the national level as President Bushs income tax cuts helped spur our nations economy to a 7.2 percent growth rate last quarter the highest increase on record since the mid-1980s. We now have a choice in South Carolina we can either implement changes that have proven to stimulate job and economic growth in other states, or sit back and hope our economy recovers.
* Income tax relief will raise personal income levels. From 1960 through 1993, residents in states with low or no income tax saw personal income levels increase 25 percent faster than those living in states with high income tax rates. Also, states that cut income taxes during the 1990s now enjoy 41 percent higher personal income levels than states that raised income taxes. Unfortunately, South Carolinas personal income level is still 80 percent of the national average.
Soon, well present a spending plan that addresses the short-term budget crisis were up against a budget that balances immediate needs with long-term reforms designed to grow jobs, expand economic activity and raise income levels. Simply put, people cant pay taxes if they dont have a job. Some folks have proposed raising taxes, but Im committed to holding the line against tax increases for that very reason.
South Carolina is at an economic crossroads. We can either follow the lead of states like New Mexico, where the Democratic governor is in the process of lowering the income tax rate from 8.2 percent to 4.9 percent to create jobs, or we can continue the policy of doing nothing that has only held us back as a state. Id ask for your help, namely by calling your legislators and encouraging them to support our plan. Together, we can keep our state home to this as well as future generations of hard-working South Carolinians.
Mr. Sanford is governor of South Carolina.