COLUMBIA — South Carolina Gov. Nikki Haley called on senators Tuesday to cut more taxes in their 2012-13 state spending plan as debate opened on the chamber floor – a demand the Senate’s financial leader called a political resume booster.
The Republican governor said the Senate must incorporate $93 million worth of income tax cuts in the Finance Committee’s $6.6 billion proposal to prove to residents and small businesses that they’re the priority.
The plan already includes one of the two bills Haley is demanding. It reduces the income taxes that small business owners pay on their profits. That four-year phase-in is expected to reduce revenue by $15 million next year and $65 million annually when fully implemented.
Asked about that, Haley said she appreciated that inclusion, but felt it doesn’t go nearly far enough. Haley insisted the Senate also include a second tax-cutting bill the House passed last month, which collapses personal income taxes from seven brackets to three. It doesn’t take effect until 2013, but Haley said the $78 million should be set aside now.
“There is no way you can make the people of South Carolina more proud than to do this,” Haley said at a Statehouse news conference as senators debated upstairs. “When you go and you spend this money, you are killing the confidence of the people of this state. You’re saying you don’t understand the value of a dollar.”
She likened South Carolina lawmakers to Congress and said they should learn from the budget crisis caused by the Great Recession: “Don’t spend it all.”
Senate Finance Chairman Hugh Leatherman said they’re not. He noted the budget plan already includes $752 million in tax relief, most of which comes off the top of tax collections due to previously passed laws, as well as $395 million set aside in reserves – nearly $60 more put in a rainy-day fund than state law requires this year.
“That’s not the way to look at things,” Leatherman, R-Florence, said of Haley’s spend-it-all assertion. “When I look at a budget, I won’t do tax relief to build a political resume. If I do it, I think it’s good policy.”
Haley, who campaigned both in- and out-of-state for Republican presidential hopeful Mitt Romney, has been mentioned as a possible running mate, though she has repeatedly said she would reject any job offer from him.
Leatherman said the state has tremendous needs after years of budget cuts.
“There are lots of holes to fill,” he said. “I’m simply not willing to go in and make cuts that are very detrimental.”
He said pride comes in meeting needs across the state, not in tax cuts expected to provide less than $100 per tax filer.
The Finance Committee wrapped up work on its plan after the Board of Economic Advisors certified that more money is coming into state coffers than initially projected. Haley has repeatedly said any excess should either pay down debt or be returned to taxpayers. On Tuesday, the former House member likened the additional $292 million in one-time and recurring money to both a tree and a piece of meat.
“The House never gets the money tree. The Senate always gets the money tree. When that money tree falls, it is like a pack of wolves on a steak, and I’m telling you that steak belongs to the taxpayers,” she said.
Compared to the House plan passed in March, the proposal being debated in the Senate includes higher raises to state workers, more money for special needs students, more new school buses, more deferred maintenance at public colleges, more law enforcement officers, and more college tuition aid.
Both the House and Senate plans provide state workers their first pay raise in four years, set aside $180 million to pay South Carolina’s full cost of deepening the Charleston harbor, provide $77 million in business tax relief through unemployment insurance, and add $153 million to a key education funding source that increases the per-student allocation to $2,012.
Haley said her executive budget provides senators a path for cutting more taxes.
Many of Haley’s recommendations are incorporated into legislators’ plans. Haley recommended, for example, adding dozens of law enforcement officers, increasing money for mental health services and providing health insurance through Medicaid for 80,000 additional children. Key differences are that she provided for no pay raises, put $25 million toward state ports, put no money toward the unemployment insurance trust fund, and decreased education spending. Rather than reduce taxes for small businesses, her proposal called for eliminating corporate income taxes over four years.