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COLUMBIA, S.C. (AP) — South Carolina House and Senate budget negotiators agreed late Tuesday to phase in a tax cut for small business owners over three years, breaking a weeks-long stalemate on the issue that had blocked a budget compromise.
But the conference committee has yet to sign a budget deal. The leaders of the House and Senate budget-writing committees expect to hash out the details line-by-line Wednesday.
That guarantees that the fiscal year will start Sunday without a budget in place. However, the chambers expect to send Gov. Nikki Haley both a budget and a continuing resolution on Thursday.
The resolution will continue to fund government at current levels, bridging the gap until Haley issues her vetoes. By law, she has five days to do so, excluding Sunday and the holiday, meaning she could have until midnight July 5. When the Legislature comes back to deal with them depends on what line items she vetoes, committee members said.
Other parts agreed to in the $6.7 billion spending plan for state taxes include a 3 percent pay raise for most state employees, $33 million in long-deferred maintenance at public colleges statewide, and roughly $20 million for a Commerce fund for infrastructure that helps close economic development deals.
The proposal adds state law enforcement officers, while giving them a 5 percent pay raise, and provides 2 percent raises for public school teachers.
The tentative deal contains $300 million to fully fund the Charleston harbor dredging project, including reserving $120 million to cover the federal government's share if necessary.
It also includes $36 million for special needs students to cover a reduction in federal funds which serve as a penalty for not spending enough on disabled students during the economic downturn.
Phase two of the State Farmers Market got just $50,000, to pay for an appraisal of property that the Agriculture Department wants to buy. The agency had sought $16 million, which was added in the Senate, but the House balked at the bulk of it going to a single property owner, especially because the proposal hadn't gone through its committee process.
The tax cut agreement gives $20 million in tax relief yearly, eventually reaching the $60 million that the House wanted. Small business owners who report their earnings as personal income would see their tax rate reduced from 5 percent to 3 percent by 2014-15.
The deal reverts to what the Senate offered Friday. A counter-offer Tuesday from the Senate would have given $40 million in relief immediately but focused the benefit on very small businesses, with profits below and above $28,250 in adjusted earnings taxed at different rates.
But House Ways and Means Chairman Brian White said that was too complicated.
"What we're after is an easy, simplified way for people to do their taxes," said White, R-Anderson. "We would like to get everybody to 3 percent to just be fair. We're coming back to your square one."
White said afterward the give-and-take was worth it.
"We couldn't get it all in one shot," he said. "Absolutely, it was worth a few days."