Most S.C. taxpayers would save an average of $86 a year under a bill proposed in the S.C. House.
Right now, any money that S.C. residents earn up to $14,500 a year in taxable income is taxed at a variety of rates, anywhere from 3 percent to 6 percent.
State Rep. Tommy Stringer, R-Greer, says that is too complicated. He wants to combine all of those tax brackets into a single 3.75 percent tax on taxable income between $2,850 and $14,500. Taxable income is how much money you earn in a year, minus any tax deductions or credits you qualify for, such as for dependents or mortgage interest.
Anything below $2,850 would not be taxed, while anything above $14,500 would continue to be taxed at 7 percent. Officials estimate the proposal would save the average taxpayer $86 a year while cutting nearly $80 million from the state’s $6.9 billion general fund budget.
“The purpose of collapsing the brackets is not to give everybody an income tax cut of any substance. It cuts slightly,” Stringer said. “It’s more to do with just simplification.”
Gov. Nikki Haley has proposed combining the 5 percent and 6 percent tax brackets, a move that would save the average taxpayer $29 a year while cutting $26 million from the state budget. But Haley said Tuesday that she supports any bill that would cut state income taxes.
“Anything that reduces income taxes in this state, I will be for,” Haley said. “I am for eliminating (the) income tax. So the fact that the House is even moving on income tax, I applaud them.”
But some Democrats were skeptical.
“I have not heard a single complaint about state income taxes, and I represent a moderate-income district,” said House Minority Leader Todd Rutherford, D-Richland. “The complaints I hear about (are) their roads, their health care. And we refuse to address those issues.”
Collapsing the tax brackets actually would raise taxes on some of the state’s poorest residents, those who now pay the 3 percent rate that would increase to 3.75 percent. However, Stringer’s proposal bill includes a “hold harmless” fund — money set aside to pay any increases for low-income taxpayers whose taxes increase.
Meanwhile, state senators are considering a bill that would raises taxes by about $200 a year on South Carolina’s wealthiest residents. The tax increase — to conform state tax law to the federal code as the state does almost every year — would apply to married couples with taxable incomes of $300,000 or more and single people with taxable incomes of $250,000 or more.
Last week, state Sen. Kevin Bryant, R-Anderson, tried to amend the bill to give those taxpayers a tax credit that would wipe out the increase. The amendment failed. But Stringer suggested his “hold harmless” fund could be amended to pay for the tax increase on the wealthy as well.
Republicans in the GOP-controlled House tried to pass the same income tax cut last year, but the bill died in the Republican-majority state Senate. The proposal is a priority of the House’s Republican Caucus again this year. Senate Finance Committee chairman Hugh Leatherman, R-Florence, said he had not looked at Stringer’s proposal and declined to comment.
While supporting the individual income tax cut, Haley said her first priority is to eliminate the 5 percent state income tax on corporations.
“Of course, corporate would come before anything else. That’s always what you hope to do,” Haley said, who contends more companies would move to South Carolina if they were exempt from paying state income taxes.
Stringer also has introduced a bill that would eliminate, over four years, the state’s corporate income tax, which totals about $253 million a year. Officials estimate that proposal would cut about $63 million from the state general fund in its first year.
Neither bill has had a hearing yet in the House Ways and Means Committee. Stringer said he expects the committee will take up the bills once it finishes work on the state budget next month.
Reach Beam at (803) 386-7038.