SC’s two income tax cut proposals could mean savings for you. Here’s what they offer
South Carolina taxpayers are probably going to see some sort of income tax cut adopted this year by lawmakers.
However, what the new income tax rates will be is still to be determined because lawmakers are considering two proposals.
The House in February unanimously passed an income tax cut bill that reduces the number of income tax rates from five to two: One at 3% and one at 6.5%. That maximum rate would be reduced further once a year until it reaches 6%. The annual tax cuts would take place over five years and only if state revenues grow by enough money.
The Senate version of the tax cut plan, which has been proposed by state Sen. Harvey Peeler, R-Cherokee, reduces the top rate to 5.7%. The 3%, 4% and 5% tax brackets would remain in place.
Peeler’s plan also includes a property tax cut for manufacturers, and he wants to refund $1 billion back to taxpayers in a one-time rebate payment.
Both plans also would allow taxpayers to fully deduct military retirement pay.
Although both proposals would eventually keep about $1 billion per year out of state coffers, they each save taxpayers money in different ways.
The Revenue and Fiscal Affairs Office provided estimates for how much less a tax filer would pay under each plan. Its analyses are based on taxable income, which is after people subtract deductions from their income when filing a return.
Here’s a look at how each plan may lessen your tax liability:
Under the House plan, someone with a taxable income between $30,000 and $40,000 a year would, on average, pay $298 less in annual income taxes when the maximum rate is 6.5% By the time the tax cut is fully in place, people earning between $30,000 and $40,000 a year would pay an average of $452 less in state income tax.
Under the Peeler plan, people with taxable income between $30,000 and $40,000 would pay $282 on average less in income taxes, state economists said.
Keep in mind, out of the 2.6 million projected tax returns filed for the 2022 tax year, 946,000 tax filers will pay no state income tax before any cut is adopted.
