South Carolina families are one step closer to seeing a lower tax bill.
The state Senate voted, 37-4, Tuesday to align the state’s tax code with federal tax changes made by Congress.
The Senate will vote again Wednesday to send the bill to the S.C. House, where it will be debated along with budget vetoes from Gov. Henry McMaster as part of a special two-day legislative session.
Lawmakers warned tax filings would be complicated and burdensome next year without the changes. S.C. taxpayers and businesses also would face tax hikes, stemming from the new federal tax law.
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“It allows our citizens to know the rules — to properly and timely file their state income taxes,” said state Sen. Thomas Alexander, R-Oconee. “And it is family- and children-friendly,” by continuing tax exemptions for children.
Late last year, Congress passed and President Donald Trump signed into law a federal tax reform bill that includes repealing personal exemptions. Without changes to South Carolina’s tax law, legislators worried taxpayers would be hard hit since the state tax code is tied to the federal law.
Simply conforming the state’s tax code to federal tax law would have resulted in S.C. taxpayers paying an additional $253 million in taxes, according to an S.C. Revenue and Fiscal Affairs Office analysis.
If it becomes law, the proposal passed by the Senate would add a $4,110 state tax deduction for dependents, starting with the current tax year. It also adds another $4,110 deduction for each child under 6 years old, meaning the parents of a toddler could get an $8,220 exemption.
Standard deductions, too, wold increase to mirror federal law, with deduction amounts increasing to $12,000 for individuals, $18,000 for heads of household and $24,000 for married couples filing jointly.
Also, starting in 2019, individual state income tax brackets would be indexed to inflation up to a 4 percent cap. That would save taxpayers $4 million a year, money that otherwise would have gone into the state’s general fund.
While supportive of the bill for protecting S.C. families from the ramifications of federal tax reform, state Sen. Sean Bennett, R-Dorchester, said the proposal fails to address more comprehensive tax reform that is needed in the state.
“We have a challenging property tax situation,” Bennett said. “We’ve got a questionable income tax scenario. We have a less-than-ideal sales tax scenario, and all the while we are shrinking and shrinking and shrinking our tax base. That will, ultimately, negatively affect us. ... We need to have sustainable revenue to support (core government services).”