South Carolina senator proposes $2B income tax cut
(The Center Square) – Taking things a step further than South Carolina’s governor and House leaders, a South Carolina senator has proposed a bill that would lower the state’s highest income tax rate from 7% to 5.7% this year in what he said would provide $2 billion in tax relief.
State Sen. Harvey Peeler, R-Cherokee, has proposed S. 1087, which has 28 co-sponsors.
“This bill provides for over $2 billion in tax relief this year and over $11 billion over the next decade,” Peeler said.
The 1.3-percentage-point cut in the state’s highest income tax bracket would amount to $900 million in annual tax relief. Peeler said the bill also would completely eliminate taxes on military retirement income and provide an additional $1 billion in one-time tax rebates.
Peeler said the measure would reduce manufacturing property taxes by 33%. The bill says 42.9% of manufacturing property would be exempt from taxes as opposed to the current 14.3% rate.
The bill was sent to the Senate Finance Committee, which is scheduled to meet at 3 p.m. Tuesday. The income tax bill is not on the agenda.
Sen. John Scott, D-Richland, said he hopes the Senate will consider rural communities in any manufacturing industry tax break.
“I want to make sure that, as we make these tax cuts, especially in bringing new industry in … one of the things that I want us to pay more close attention to is where these manufacturers locate,” Scott said. “Because we put these manufacturers side by side in large urban communities, we’re beginning to drain these rural communities.
“Yes, these folks are getting jobs. But the shift itself is causing a lot of problems and it’s going to get worse in these rural counties.”
The bill would eliminate income tax on the first $3,200 of income, then incrementally tax at 3% minus $96 up to $6,410, 4% minus $160 up to $9,620, 5% minus $256 up to $12,820 and 5.7% after that.
The proposal followed Gov. Henry McMaster and House leaders’ proposed $1 billion tax cut that would drop the top tax rate from 7% to 6.5% this year.
The House would drop the state’s effective income tax rate from 3.1% to 2.34%.
“We are in a unique situation this year where we have the opportunity to provide tax relief to every South Carolinian while still maintaining the economic success that we have experienced in the past,” House Speaker Jay Lucas, R-Darlington, said during an announcement of the House plan. “Now is the time for tax relief.”
The House tax cut would cut the current 4%, 5% and 6% rates for income between $3,200 and $16,040 to 3% and would lower the rate for any income above that from 7% to 6.5%. The plan is for the top rate to drop to 6% within five years.
Both plans come as South Carolina Board of Economic Advisors (BEA) updated estimates for state collections of taxes and fees, estimating that South Carolina will now have a $4.628 billion surplus between this and next fiscal year.
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