Income tax

Income tax cuts and rebates at center of SC’s $13.8 billion budget

COLUMBIA, SC (AP) — Many South Carolina taxpayers could soon receive several hundred dollars in tax rebates in addition to a reduction in their regular tax rates after a group of powerful House and Senate lawmakers agreed to a compromise on the state budget on Friday.

State lawmakers have $13.8 billion to spend on the plan which begins July 1 thanks to a booming economyfederal pandemic money and savings from the last two budgets just in case COVID-19 wrecks the financial system.

Along with the tax cut, the plan increases the minimum salary for teachers from $36,000 to $40,000, puts another $1 billion in the road repair and expansion, gives state employees a 3% raise and a $1,500 bonus, raises a number of state law enforcement salaries, gives money to colleges if they freeze fees tuition and set aside about $1 billion in case this is the year the economy craters.

“We have made substantial investments in South Carolina. One billion in reserves, $1 billion in roads and $2 billion in tax relief,” Republican House Speaker Murrell Smith said.

The General Assembly returns on Wednesday to examine the final draft budget.

The centerpiece of the budget is tax cuts and refunds. Every South Carolina who pays income tax should recoup that amount for that tax year, up to about $800. About 44% of the state’s 2.5 million people who file returns end up paying nothing in income tax and won’t receive a check when the rebates come in November or December. Refunds will cost around $1 billion.

The Original Discount Plan adopted by the Senate provided everyone who filed an income tax return with a refund whether they paid or not, noting that those people also paid sales taxes and other monies in the accounts of the government.

“Everyone has their skin in the game, but this is an income tax refund and therefore no income tax, no refund,” said House Ways and Means chairman , Gary Simrill, who called it the fairest solution.

The compromise also immediately cuts the top state tax rate from 7% to 6.5%. for the 1.1 million taxpayers who pay the most. The plan then removes 0.1% of the maximum rate each year, with the state continuing to significantly increase revenue until the maximum rate is 6%. This is the house plan supported by Governor Henry McMaster.

The other tax bracket will be 3%, reducing taxes for more than 300,000 taxpayers currently between the 6% and 3% brackets. Anyone below this amount will not pay taxes at all.

“A taxpayer knows better what to do with his money than the government does,” Simrill said.

The budget compromise also reorganizes the way the state finances education, simplify a complex formula in money mainly based on student-teacher ratio and minimum teacher salary.

Lawmakers want to invest $275 million more in the formula. Senate Finance Committee Chairman Harvey Peeler said districts can use the money as they see fit, suggesting a $4,000 pay raise for all their teachers was a good start.

“There’s nothing stopping them from increasing it even more,” Peeler said.

On the roads, most of the money is going to speed up big interstate projects, like widening of Interstate 26 from Charleston to Columbia three lanes in each direction or unravel where Interstates 20, 26, and 126 all meet west of Columbia.

But Smith said the budget also helps small counties and roads. Sumter County where he lives will receive $8 million for projects when it usually receives only half of that.

“We’re going to take care of local areas and also fix our highways,” Smith said.

The four Republicans and two Democrats on the conference committee praised each other for their work. It was Peeler’s first budget after more than 40 years in the Senate and Smith was promoted to Speaker of the House last month after guiding spending plans across the House since 2018.

The income tax cut is less than the immediate 5.7% cut originally proposed by Peeler. The home plan initially had no refunds, while Peeler presented his project saying “you can’t cut Harvey Peeler’s taxes”.

“So far they can’t,” Peeler said when reminded of his quote on Friday.

Copyright 2022 The Associated Press and WIS News 10. All rights reserved.

Notice a spelling or grammatical error in this article? Click or tap here to report it. Please include the title of the article.