Politics & Government

Fact-checking Templeton: Did Gov. McMaster OK SC’s ‘largest tax increase’?

Republican candidate for governor Catherine Templeton is accusing Gov. Henry McMaster of raising taxes big time on South Carolinians.

Again on Tuesday, stumping at the First Tuesday Republican Club in the Midlands, Templeton said McMaster “raised our taxes — the largest tax increase in modern history is what it’s being called — and I’m not even talking about the gas tax.”

The Mount Pleasant attorney, the former head of the state’s health and labor departments, did not offer details on the tax increase. But, in a question-and-answer period, Templeton said she is referring to a pension bill passed last year that is pouring taxpayer money into the state’s cash-strapped retirement system.

“So he signed it into law. That’s how he did it,” Templeton said of McMaster, adding, “We’re all paying more into our general fund. It’s a tax on all of us.”

McMaster’s campaign fired back Tuesday.

“It wasn’t a ‘tax increase’ when DHEC diverted more than $100,000 to pay Catherine Templeton’s consulting contracts, and it’s not a ‘tax increase’ when existing money is prioritized to stabilize our pension system,” said McMaster spokesperson Caroline Anderegg.

“Catherine either doesn’t understand basic finance or she continues to make things up.”

After stepping down as DHEC's chief, Templeton was paid $124,000 to consult for two state agencies, including $86,500 from the health agency.

No tax increase included

The new pension law did not raise taxes on South Carolinians. But it did earmark hundreds of millions to the pension system.

Part of the money to shore up the retirement system is coming from the state’s general fund, made up primarily of sales and income taxes. That fund grows — without lawmakers having to raise taxes — as long as more people move to the state and the economy grows.

At most, the state will spend about $258 million more each year from the general fund on its retirement system in the 2022-23 budget year. Another $236 million will come from cities, counties and schools that employ public-sector workers.

Templeton says the added state money going for pensions will take away from other needs, such as paying teachers or first responders. She also predicted there will be tax increases as local governments try to make up for their higher pension costs. “They’re going to have to have a tax increase.”

More changes to the state’s retirement system are likely.

McMaster and Templeton generally agree the pension system needs an overhaul if it is to meet its future obligations. They also agree that doing away with the state’s defined benefit pension plan in favor of a 401(k)-like account for new state employees should be part of the solution.