SC Senate passes income tax cut, $1B rebate plan. What happens next
South Carolina state senators on Thursday voted 40-0 to push through their tax cut plan, which also includes sending $1 billion in rebates back to tax filers.
But it’s a plan that requires agreement from the House, which has its own tax cut plan that doesn’t include a tax rebate.
The Senate plan, which costs about $2 billion, reduces the top income tax rate to 5.7% from 7%. It also reduces manufacturing property taxes.
“This is a massive tax relief bill, which is needed,” said state Sen. Mike Fanning, D-Fairfield.
Eventually, the two plans will have to be reconciled, which may take place when the two chambers work out a budget agreement later this spring in a conference committee.
The House is scheduled to begin its debate on a $13.9 billion statewide spending plan on Monday.
The rebate plan proposed by Senate Finance Chairman Harvey Peeler, R-Cherokee, would send between $100 and $700 back to every tax filer depending on their tax liability. Even those who file but pay no income taxes because they have enough deductions or have a low enough income, still would get at least $100 back.
Peeler, who succeeded the late Hugh Leatherman as Finance Committee chairman, pushed for the tax cut in his first year overseeing the budget process in the Senate.
“We’ve only just begun to trim,” Peeler said on the floor, adding later that he referred to both cutting spending and taxes.
Lawmakers and Gov. Henry McMaster are pushing for a tax cut because the state has $4.6 billion in additional money to distribute in this year’s budget discussions.
The House version of the tax cut would lower the top tax rate from 7% to 6.5% immediately and then incrementally lower the top rate to 6% over the course of five years as long as state revenues continue to grow by enough money.
The House plan also collapses the lower tax brackets into one 3% rate. The House plan would cost about $600 million in the upcoming budget. The plan would keep $1 billion out of state coffers once the tax rate cut is fully phased in.
The Senate plan cuts the top rate immediately to 5.7% instead of phasing it in.
“We have the money now. Let’s do it now. The need is there,” Peeler said. “We found out how much of that surplus we had, what we need to perform the functions of government, and what’s was leftover (we) give back to the taxpayers and that’s how we did it.”
This story was originally published March 10, 2022 at 3:46 PM.
