SC taxpayers to get one-time cash bump after lawmakers hash out budget deal with tax cuts
Taxpayers in South Carolina will get some extra holiday season spending money under a budget compromise state lawmakers agreed to Friday, which provides a $1 billion rebate to state residents.
The rebate, pushed by Senate Finance Chairman Harvey Peeler, is coupled with a tax cut that will lower the top rate to 6.5% from 7%. As long as the economy continues to grow and state revenues increase by enough money, the top rate will gradually be reduced to 6% over the course of five years.
Tax rates in the lower brackets will be combined into a 3% tax bracket.
The rate cuts would keep about $600 million out of state coffers the first year. That amount will eventually reach $1 billion a year over the course of the five years.
Lawmakers also agreed to reduce the manufacturing property tax rate from 9% to 6%, which will result in about $100 million less revenue for the state.
The tax cuts and rebate are part of a $13.8 billion spending plan, the largest in the state’s history.
“While we have the largest budget, our economy is performing better than it ever has in history of South Carolina,” said Speaker of the House Murrell Smith, R-Sumter. “While this economy may slow — I hope it doesn’t — I think South Carolina is poised better than any other state in this union because we have prepared the future of South Carolina by making transformational investments.”
Under the income tax cut, 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.
As for the rebate, income tax payers in November or December will receive money based on their income tax liability, with the maximum rebate amount being about $800.
“That’s more money in their pockets to spend how they see fit,” said Gary Simrill, R-York, chairman of the House Ways and Means committee. “Obviously, a taxpayer knows better what to do with their money than government does.”
However, people who don’t pay income taxes because they have enough deductions and exemptions or don’t make enough money to pay income taxes will not see any rebate. The Senate initially wanted to send money to those without an income tax liability because they also pay state sales tax.
“Those are user fees, of course, across the state and everyone has skin in the game, but this is an income tax rebate and so no income tax, no rebate,” Simrill said. “This was the most fair and equitable way to distribute those dollars in the House and Senate both agreed with that.”
Budget writers cut income taxes and voted to rebate money because they had an additional $5.9 billion to allocate for the upcoming budget year, which starts July 1.
Money coming into the state has increased in recent years due to an economy initially propped up by the federal stimulus dollars, and now because of wage growth and inflation, state economists have said.
“Today everyone is a winner,” Peeler said. “The Senate, the House, state agencies, employees, and most importantly the people of South Carolina.”
This story was originally published June 10, 2022 at 10:51 AM.
