State Sen. Katrina Shealy says she has pre-filed legislation that would eliminate South Carolina's individual income tax.
If it becomes law, South Carolina would become the eighth state in the country that does not collect individual income taxes. The others are Alaska, Florida, Nevada, South Dakota, Texas and Washington.
In a news release, Shealy, R-Lexington, said her bill would lower the state's income tax rates by 1.4 percent each year until the tax is eliminated.
“When I was elected, I made a commitment to the people of South Carolina that I would work to eliminate the state income tax, make government smaller and more efficient, and help all South Carolinians keep more of their hard-earned money," she said. "This bill has the potential to accomplish all of these things."
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Shealy says, in the first year, South Carolinians would get to keep a combined $560 million in tax money. Of course, that means South Carolina would lose $560 million in revenue. Once the tax is eliminated completely, it would cost the state $3.4 billion -- or more than half of the state's general fund.
Right now, South Carolina has six tax brackets based on your taxable income (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.)
Here's the breakdown:
- For earnings between $0.00 and $2,850, you pay nothing
- For earnings between $2,850 and $5,700, you 3 percent
- For earnings between $5,700 and $8,550, you pay 4 percent
- For earnings between $8,550 and $11,400, you pay 5 percent
- For earnings between $11,400.00 and $14,250, you pay 6 percent
- For earnings over $14,250.00, you pay 7 percent
In recent years, Republican lawmakers have suggested lots of changes to this tax structure. Gov. Nikki Haley proposed combining the 5 percent and 6 percent tax brackets, saving taxpayers an average of $29 per year while cutting $26 million from the state budget. Rep. Tommy Stringer, R-Greenville, proposed combining the 3, 4, 5 and 6 percent tax brackets into one 3.75 percent bracket, which would save the average taxpayer $86 a year while cutting $80 million from the budget.
Haley, Stringer and a host of other Republicans have also proposed eliminating the state corporate income tax. South Carolina collected just over $386 million in corporate income taxes in the fiscal year that ended June 30.