If you’re like me — someone who paid at least $800 in SC income tax for 2021 — you’ve got plenty of thank you notes to write.
Dear retired neighbor. Dear minimum wage grocery clerk. Dear single mother earning double the minimum wage. Dear middle-income homeowner with enough write-offs to not have to pay income tax:
Thank you for purchasing all those additional taxable items last year – electronics, clothing, furniture, garden tools, automotive supplies, cleaning products, home decorations. Thanks to you, I’m going to get $800 back from the state of South Carolina this fall.
Lawmakers call it a “refund”, but that’s not entirely accurate, because an income tax refund comes from extra income taxes paid, and 40% of the billion dollars backed by those refunds came from all the additional sales tax revenue our state collected last year. .
Too bad you don’t have one yourself. After all, you probably paid more sales tax than me; you certainly paid more of your income than I did in sales taxes. Our legislators say that if they had shared the manna with all the South Carolinians who created it, instead of limiting it to those of us with higher incomes, the maximum they could have given to each of us was $700.
Of course, you understand that I need that $100 more than you, because I make more money. … Hmmm.
In any event. Maybe you should find a job that pays over $15,000 a year so you can take advantage of all that extra money you’re paying in sales taxes. Oops. Guess it’s too late for that, since the economy is collapsing and there won’t be another billion dollars to plow a hole in our legislators’ pockets next year.
The good thing about the law is that legislative negotiators agreed to the House version of the permanent tax cut. This version starts out smaller than the Senate’s $1 billion plan, and is gradually increased up to $1 billion only as the economy grows. So it won’t rise next year and dig a hole in the state budget if tax revenue flattens, as official state forecasters predict.
More importantly, the House version provides a bigger break for middle-income filers rather than concentrating almost all of it among those with the highest incomes. Those with the highest incomes will still receive the biggest dollar benefit — they, after all, pay the most income taxes — but the Senate version only cut the top tax rates. , while the House version, now state law, cut some of the lower marginal rates, shifting more savings to middle incomes.
Even the less bad house version of the permanent tax cut is far from perfect, of course. The economy is slowing, which means the tax cut could make it harder for lawmakers to cover basic state needs, perhaps as early as next year.
And then there’s the structural problem: South Carolina’s progressive income tax balances out our regressive sales tax – so the rich, the poor, and the rest pay about the same percentage of their incomes in income taxes. ‘State. Reducing the income tax the imbalance, so every year it’s phased in, our state tax system will become a little more imbalanced, with the poorest people paying a larger and larger share of their income to the state and the wealthiest people paying a smaller and smaller share. .
Given all of this, you’d think lawmakers could have at least thrown the working poor and struggling retirees a bone when they granted one-time tax refunds. No.
The House refused to accept the Senate’s plan to give back at least $100 to everyone who files a tax return. House negotiators insisted on returning everyone’s income taxes in 2021 to a limit of about $800 and leaving out the 40% of SC taxpayers who earned too little (or, in cases rarer, over-deducted) for owing income taxes. This includes most retirees, everyone earning minimum wage, single mothers earning up to $30,000, and many people we call the working poor.
They never really explained what they had against the working poor. Instead, House Ways and Means chairman Gary Simrill – who was also the chief cheerleader for the less unfair permanent tax cut approach – kept repeating his mantra about the fact that it is absurd to give tax refunds to people who pay no tax. Perhaps he thought that if he said it enough, we would forget that sales taxes are in fact taxes. That in fact, our state government is about equally dependent on income tax and sales tax revenues. And that 40% of the refund windfall came from sales taxes.
Even Senate Finance Chairman Harvey Peeler raved when his top aide read the final details of the state tax bill and budget. “Today,” he said, “everyone is a winner: the Senate, the House, the employees, and most importantly, the people of South Carolina.”
Well, 60% of people in South Carolina.
The other 40% who helped fund those rebates get nothing. Except those thank you notes the rest of us send them.
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