January 22, 2015 / 1:16 AM / 3 years ago

South Carolina governor seeks major tax cut, takes swipe at labor

WASHINGTON, Jan 21 (Reuters) - South Carolina Governor Nikki Haley said Wednesday she wants to slash the state's income tax by nearly a third to bolster its economy.

"Let's cut our state income tax rate from 7 percent to 5 percent over the next decade. That's a nearly 30 percent reduction in state income taxes," Haley, a Republican, said in her annual address. "It will be a massive draw for jobs and investment to come to our state."

The governor also suggested the state should increase its gas tax by 10 cents over the next three years, adding "we can do it without harming our economy, because when coupled with the 30 percent income tax cut, it still represents one of the largest tax cuts in South Carolina history."

She added, though, that the extra gas tax revenue should be used only for infrastructure and she would "veto any straight-up increase in the gas tax."

South Carolina's unemployment rate was 6.7 percent in November, the latest month for which data is available. That was well below the 11.9 percent it reached at the end of the 2007-09 recession.

Haley said her reform proposal "will put more money in the pockets of every South Carolinian, letting them keep more of what they earn. It will reward work, savings, and investment - all the things we need to do to make our state stronger and our people more prosperous."

The cuts would also put the income tax rate below that of neighboring North Carolina, she added. Last week, North Carolina said its revenues were sliding for the second fiscal year in a row due to its 2013 tax cuts.

A report released by the National Conference of State Legislatures on Wednesday found South Carolina's current personal income and general sales tax collections meeting forecasts that had recently been raised. Altogether, the state's "revenue growth is slow and steady," according to the report.

The governor, a star on the national political stage, also took a swing at organized labor, specifically calling out the International Association of Machinists and Aerospace Workers. She said its efforts to organize workers at a Boeing plant in Charleston were a "union power grab."

"We have a reputation -- internationally -- for being a state that doesn't want unions because we don't need unions," she said, describing the state's current low union membership rate of about 3.7 percent as "a game-changer." (Reporting By Lisa Lambert; editing by Andrew Hay)

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