Haley budget offers tax cuts

Haley

COLUMBIA -- Corporations and most taxpayers would get a break on their income taxes while public workers in South Carolina would go a fourth year without a pay raise under a budget proposal Gov. Nikki Haley released Friday.

Haley's recommendations for a $5.7 billion state budget for 2012-13 would reduce a key funding stream for public schools that primarily pays teachers' salaries, while adding $10 million for charter schools.

She wants to add about 100 law enforcement officers and several family court judges, and put money toward mental health treatment.

Haley said state employees should look for a raise in 2013-14.

"You can't give everything you want to give. Do I want state employees to have more? Yes. Was this year the year to do it? No," Haley said. "I think they deserve it. We have some of the hardest-working state employees out there. What's more important is we get these agencies in order, and we give them stronger agencies to go into every day."

Haley, a former state House member, recognized that legislators ignored former Gov. Mark Sanford's executive budgets, but she said she wants budget-writers to use her budget as a template.

"While I like a lot of things she's put in there, we'll see what happens," said House Ways and Means Chairman Brian White, R-Anderson. "You may see this year more things in line with the governor's budget than in the past."

Haley didn't propose a budget her first year. Her plan for the fiscal year that starts July 1 would begin eliminating the state's corporate income taxes, something she touted on the campaign trail in 2010. Her budget plan puts $62 million into the first of a four-year phase out.

It would give most taxpayers an $84 reduction in their state income taxes, at a cost of $78 million, by streamlining six income tax brackets into three. More tax relief is coming next year, she said.

"This is individual tax reform where every person across the state is going to benefit, and that's incredibly important."

Actually, a substantial number of tax filers would receive no break, which would go to people paying in four tax brackets between 4 percent and 7 percent.

More than 40 percent of South Carolina filers pay no state income tax. Of those who do, 45 percent -- representing 900,000 tax returns -- fall into the bottom-paying tax bracket of 3 percent, according to the state Department of Revenue.

Haley wants to put $75 million toward encouraging counties to take over the maintenance of some state roads.

The state Department of Transportation would use the incentive money to divest the responsibility of state roads to counties, on a voluntary basis through what Haley called a reverse auction system.

Budget advisers expect an additional $913.4 million in one-time and recurring revenue for 2012-13 because of surplus from the fiscal year that closed June 30, along with more money coming in this year than legislators budgeted, plus continued growth.

They told legislators this week that the outlook is not nearly as rosy as it seems because required increases -- including in property tax relief and reserve funds -- gobble up most of that money.

 

Some highlights from Gov. Nikki Haley's budget proposal:

--$100 million to cover increases in employees' health care costs and pensions.

--$100 million to the state's general reserve fund, about $60 million more than state law requires.

--$78 million to give most taxpayers an $84 break on state income taxes, by condensing six brackets to three.

--$75 million to transfer maintenance responsibilities of some state roads to counties, on a voluntary basis.

--$62 million to start a four-year phase-out of corporate income taxes, currently at 5 percent.

--$25 million in a new fund for ports improvement, not to be spent without federal matches.

--$17 million for mental health services.

--$15 million for sentencing reform in the prisons and parole agencies.

--$14 million for a new computer system for the Department of Revenue.

--$10 million for charter schools.

--Department of Public Safety would get money to add 40 highway troopers, 10 transport police and six protective services officers.

--State Law Enforcement Division could add 30 agents, 11 IT employees, and eight in the DNA database crime lab.

--Forestry Commission could add six to eight firefighters and would get $3 million for forest fighting equipment.

--No raises for public workers for the fourth consecutive year.