COLUMBIA — The Senate Finance Committee advanced a bill Wednesday reducing taxes for small business owners, as it continued crafting its budget plan for 2012-13.
The measure approved 17-1 would cut taxes for small business owners who report their profits as personal income. Their tax rate would decrease from 5 percent to 3 percent over four years.
Budget advisers estimate the measure would reduce state revenue by $15 million next year and $65 million annually when fully implemented, starting in 2015-16.
“This type of tax cut is good policy,” said committee Chairman Hugh Leatherman, R-Florence. “When it helps mom and pop businesses, all that money stays in the state economy.”
He said there are 82,000 small businesses in South Carolina that accounted for the bulk of job growth in recent years.
Budget officials estimate 60,000 small business owners would benefit, eventually saving roughly $1,000 each.
The House approved the bill two weeks ago as part of the majority GOP caucus’ seven-bill tax package, three of which made it to the Senate.
The vote comes as the Finance Committee continues work on its state spending plan for the coming year.
The Board of Economic Advisors certified Tuesday an additional $292 million in revenue above earlier projections.
That includes $155 million in one-time spending money coming in during the fiscal year that ends June 30 and $137 million in recurring funds added to next fiscal year’s base projections.
Gov. Nikki Haley has repeatedly said she wants any extra money used to either pay down debt or returned to taxpayers.
Leatherman said the Legislature should get credit for billions of dollars of tax cuts over the last 20 years.
“We’re often labeled as spending every penny we get our hands on, when a big part of the budget is tax relief,” he said.
As written so far, the 2012-13 budget includes $752 million in tax relief, according to documentation distributed to senators.
That includes $554 million in property tax cuts required to come off the top of state revenue due to previously passed laws, $77 million that the House put toward keeping businesses’ unemployment insurance taxes down, $106 million in other business reimbursements, and the $15 million small business tax cut that appears headed toward passage. An additional $395 million is set aside in reserves.
The House passed its $6.5 billion spending plan for state taxes in March.