SC lawmakers pass historic spending plan headlined by $1B rebate, income tax cuts
A $1 billion tax rebate for South Carolina residents included in the state budget that could provide up to $800 for some income taxpayers is headed to the governor’s desk for official approval.
The General Assembly on Wednesday approved a $13.8 billion spending plan that includes the rebate on top of a tax cut that reduces the state’s top income tax rate and collapses several tax brackets to create a two-rate system.
“It is the largest tax cut and tax rebate in the history of South Carolina,” said Senate Finance Chairman Harvey Peeler, R-Cherokee, who called the budget a “win-win-win situation” for taxpayers.
“This budget is what fighting for the taxpayer looks like,” he added.
The Senate adopted the budget plan unanimously, 42-0. The House passed it 107-8. All eight “no” votes were cast by Republicans.
Other budget highlights include:
- A $4,000 increase in minimum teacher salaries to bring the state’s starting teacher pay to $40,000;
- A 3% raise and $1,500 bonus for state employees and an increase in starting salaries and pay for law enforcement and correctional officers;
- $1 billion in additional state road funding;
- More than $275 million in new annual funding for public education
- And enough money to allow colleges and universities, including technical colleges, to freeze in-state undergraduate tuition for a fourth straight year.
The record spending plan, which starts July 1, was made possible by South Carolina’s thriving economy and an influx of federal stimulus dollars, state economists have said.
The size of rebate taxpayers get will depend on their income tax liability. Residents who don’t pay income taxes – more than one-third of tax filers – will not receive a rebate.
The tax cut included in the budget will immediately reduce the state’s top income tax rate from 7% to 6.5%. That lower rate would then drop further – down to 6% over the course of five years – if the state’s economy continues to grow steadily.
The state’s three lower income tax brackets will collapse into a single 3% bracket under the plan.
First-year savings from the tax cut will depend on an individual’s taxable income.
On the low end, someone with a taxable income between $5,000 and $10,000 would pay $17 less in annual income taxes under the plan, according to the state’s revenue and fiscal affairs office. On the high end, a resident taxed on between $90,000 and $100,000 would pay $617 less.
Senate Majority Leader Shane Massey, R-Edgefield, said he thought lawmakers should have cut taxes even further, and done so in one fell swoop, given how much extra money they had to spend this year.
“We should have done better than this. This isn’t cool,” he told his colleagues on the Senate floor Wednesday. “If one of the arguments for an income tax cut is that we are uncompetitive, or we’re not as competitive because of our income tax rates, this doesn’t fix that. We’re still the highest in the Southeast.”
Massey said he preferred the tax cut plan the Senate originally passed, which would have reduced the top marginal tax rate to 5.7%, rather than the compromise plan approved Wednesday that will take it to 6.5% and, if the economy continues to grow, to 6% over five years.
“This is a setup,” said Massey, who ultimately supported the compromise plan. “I am convinced you’re not going to get to 6% in five years.”
This story was originally published June 15, 2022 at 1:46 PM with the headline "SC lawmakers pass historic spending plan headlined by $1B rebate, income tax cuts."