Gov. Nikki Haley arrived in North Charleston Tuesday afternoon to pitch her $140 million tax relief plan, part of her first executive budget since taking office in January 2011.
Speaking in the parking lot outside Banks Construction Company in North Charleston, Haley laid out the plan's four main points:
1. Phasing out the corporate income tax over a four-year period beginning on Jan. 1, 2013, with a reduction of the rate from 5 percent to 3.75 percent. Haley pitched the tax cut as useful for attracting businesses and jobs to the state, saying, "The biggest recruitment tool you could ever give me is to be able to go out and say that the corporate income tax is being phased out." She estimates the tax cut would save businesses $61.6 million in the first year.
2. Consolidating the six individual income tax brackets into three: 0 percent, 3.75 percent, and 7 percent. Individuals currently paying 4 percent, 5 percent, or 6 percent would all pay 3.75 percent under the plan, while people currently paying 3 percent would be grandfathered in to continue paying 3 percent. The current 0 percent and 7 percent brackets would stay the same.
3. Amending the state constitution so that property tax rates can be set by statute. Currently, property tax rates are established in Article X of the constitution, requiring the legislature to amend the constitution every time it wants to change the rates. Haley has her eyes set on cutting the manufacturers' property tax, which she would eventually like to decrease form 10.5 percent to 6 percent. Currently, certain large manufacturers including Boeing and BMW are exempt from the tax.
4. Requiring the Board of Economic Advisors and the Department of Revenue to report twice a year the number of beneficiaries of each tax credit, deduction, and exemption. They would also have to report the effects of the exemptions on the State Treasury.
Haley says her plan would provide $140 million in recurring tax relief as part of the state's $5.7 billion general-fund budget. She asked supporters of her plan to call their legislators and push for it to pass. The cuts are part of the governor's executive budget that would also decrease state education funding by $80 million by eliminating all one-time funding from the current school year.
Asked how her budget would account for the lost revenues from cutting the corporate income tax, Haley replied that the cuts would pay for themselves in job creation.
"I'm always amazed by the people that say, 'If you cut, where is the money going to come from?'" Haley said. "If you ask these guys, any of the business people, if we cut taxes, they will increase revenues, they will hire more people, and you will turn the economy. You can ask someone who went to school in economics. That's the fundamental rule: Give them cash, and they will spend it turning the economy. This tax relief will continue to give more and more by revenue; it will give more and more by jobs."
"I just lost another company on Sunday," Haley added, referring to Bi-Lo, which announced it would move its headquarters from Mauldin to Jacksonville, Fla., after merging with Winn-Dixie and being promised up to $6.6 million in incentives by the state of Florida. "I can't continue to try and do my job if I'm not given the tools to do it."
Meanwhile, the GOP-controlled House of Representatives has proposed a tax relief plan (and a $6.5 billion budget) that would slightly lower the state sales tax rate while eliminating tax-free back-to-school shopping days and reviewing all sales tax exemptions every five years. The House plan would also cut the business property tax rate from 10.5 percent to 6 percent and reduce property taxes on commercial and rental properties from 6 percent to 5 percent. Like Haley's plan, the House plan would eliminate the corporate income tax over the course of four years. The House's proposed budget would also spend $152 million on giving raises to teachers and $180 million on deepening the Charleston Harbor.