Republican legislators want to boost job growth by giving tax breaks to millionaires who invest in fledgling South Carolina companies.
Supporters said Thursday the proposal is meant to encourage rich investors to put their money in startup businesses that will create high-paying jobs in a state struggling with high unemployment.
"It's truly to boost our economy during very, very difficult times," said Rep. Joan Brady, R-Columbia, the main sponsor of one of three similar GOP bills. "We don't have money as a state to invest in emerging companies. This rewards companies willing to take a personal risk, and we're saying, 'Thank you, and we're going to help you.'"
But Democratic Rep. Joe Neal said he worries about further reducing revenue at a time lawmakers are making draconian cuts to fill a $700 million budget shortfall.
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"The concept of investing in cutting-edge technology is fine," said Neal of Hopkins, the lone Democrat on a House panel considering the measure. "But I worry about continuing to push money to the wealthiest sector while cutting needs."
A House Ways and Means subcommittee delayed action on the measure Thursday to resolve specifics.
But the idea is expected to advance: House Republicans, who control the chamber with a 76-47 majority, have made it a priority for the year. They've also named it after the late Rep. Bill Wylie. Lawmakers say the Simpsonville Republican was working on it when he died of a heart attack last September.
The differences between the two House bills center on how big of a tax break to give.
Brady's would let so-called "angel investors" claim 25 percent of their investment as a credit on their state income taxes - in line with a similar law in neighboring North Carolina. It caps the total credits at $3 million yearly.
Investors could get tax credits for 35 percent of their investment - in line with neighboring Georgia - under a bill by Rep. Dwight Loftis, R-Greenville. It caps the impact to the state budget at $6 million yearly.
Brady said she wanted to take a more conservative approach to start, partly to counteract concerns about the state's budget woes. Loftis said the state needs to offer more to be competitive and secure as much of the investment pie as possible.
Both of their bills cap the tax credit to each investor at $100,000 a year, and allow them to recoup it over 10 years.
Supporters say the measure is needed to encourage investment in South Carolina companies now going to startups in other states.
About 30 other states already give tax credits to "angel investors," said Matt Dunbar, managing director of Upstate Carolina Angel Network in Greenville, one of two South Carolina members of the national Angel Capital Association.
The Securities and Exchange Commission defines angel investors as individuals with a net worth of at least $1 million, who make at least $200,000 a year personally or $300,000 as a couple.
Dunbar contends there are tens of thousands of qualified investors in South Carolina, and the bill would "encourage people on the sidelines to put money in these deals."
While the tax credit will cost the state upfront, he said, the state would recoup many times the initial investment with high-paying jobs.
But John Ruoff of South Carolina Fair Share said the state's return would be very difficult to evaluate. While such investment is clearly good for the state, he said, he questions the need to subsidize it, especially as Republicans nationally complain the government can't create jobs, and needs to get out of business' way.
"The nature of capitalism is to evaluate a risk and decide whether to invest," Ruoff said. "Why do I need the state of South Carolina to subsidize taking risk?"