SC House leaders just want to tackle the income tax cut
By JEFFREY COLLINS
The Associated Press
COLOMBIA — Republican leaders in South Carolina’s House appear poised to tackle income tax cuts in the state before the end of this year’s General Assembly session in May.
A House subcommittee plans to pass a bill reducing the state’s top tax rate from 7% to 6% in time for consideration with the budget later this month.
The proposal calls for a reduction of 0.2% at a time over five years as long as state revenues continue to grow by at least 5%. It would cost about $750 million when fully implemented, according to a tax impact summary by state economists.
Tax cuts are buzzing around the South Carolina Statehouse in 2022. Republican Gov. Henry McMaster again mentioned a similar plan for the House bill in his budget outline and state of the art address. state last month.
Democratic Rep. Spencer Wetmore, in her party’s response, told Republicans “let’s start working together to deliver tax relief to working families who really need it” without disclosing a specific plan.
South Carolina has more than $5 billion more to get through this session. About $1 billion of that is expected in additional taxes as more people move into the state and the economy continues to boom.
A power shift in the South Carolina Senate Finance Committee could also open the door to income tax reform. Republican Senator Hugh Leatherman led the committee for 20 years before his death in November. Leatherman was cautious about cutting taxes after facing devastating budget cuts during the Great Recession around 2008.
So the key question for this session may not be whether to cut taxes, but whether to include an income tax cut as part of a broader effort to reform all manner of taxes in the state, from hundreds of deductions and income tax code rules to dozens. from sales tax exemptions to a 2006 property tax swap called Law 388 that limited the amount local governments can collect even when real estate prices rise.
House Majority Leader Gary Simrill said Thursday he wants the House to tackle only the income tax part this year. The Rock Hill Republican tied the sweeping tax cut to a bill that would exempt veterans’ retirement income from state taxes, which is estimated to cost about $10 million a year.
Simrill and the rest of the House subcommittee heard a brief presentation from the Executive Director of the State’s Office of Revenue and Fiscal Affairs, Frank Rainwater, on the fact that saying that the top tax rate of South Carolina’s 7% isn’t the whole story.
By the time exemptions and deductions are factored in, few people pay such a high rate. But 44% of taxpayers pay no state taxes, while 9% of taxpayers are responsible for about 60 cents of every dollar in state income taxes, Rainwater said.
Adjusting taxes isn’t as simple as plugging numbers into an Excel spreadsheet and there are so many variables that it’s impossible to identify an average taxpayer, Rainwater said.
“A big thank you to my high school algebra teachers — that’s the only reason you need to take Algebra 2 in high school to solve these problems,” Rainwater said as he began his presentation.