By Jeffrey Collins
COLUMBIA, SC (AP) — Another round of better-than-expected economic news from South Carolina led the Republican governor and House leaders to agree on Tuesday to work toward a bigger income tax cut than they did not initially offer it.
The proposal would cost $600 million next budget year and cut income taxes for all but about 120,000 of the 1.5 million people and couples who pay taxes.
“We are in a unique situation this year. We have the opportunity to provide tax relief to every South Carolina while maintaining the economic success we have enjoyed in the past,” said House Speaker Jay Lucas, a Republican from Hartsville.
Two dozen House Republicans crowded into the governor’s office on Tuesday about an hour after state economists reported South Carolina was continuing to grow at an unprecedented rate, raising their estimates of how much the The state is expected to collect more than $600 million in taxes and other recurring funds for the budget year that begins in July.
This The type of growth won’t last forever, it’s sales and corporate taxes spurred by federal stimulus and COVID-19 relief funds, said the executive director of the office of revenue and of State Fiscal Affairs, Frank Rainwater.
But there’s no doubt the state is also growing outside of federal money with higher wages raising income taxes, Rainwater said at an agency meeting Tuesday.
“Federal money helped,” the governor said an hour later. “But the conservative policies we had in this state are what allowed that to happen.”
No senator was at the governor’s press conference, but Senate Finance Chairman Harvey Peeler later said in a statement that he looked forward to working with McMaster and the House on a tax cut.
“There is no doubt that the time has come for a significant tax reduction for our citizens. Projected revenues ensure that we can both fund government operations and ease the burden on our people,” said Republican Senator Gaffney.
The proposal would cut the state’s top tax bracket, which 1.1 million of the 2.6 million eligible people pay, from 7% to 6.5% immediately, with plans to continue reducing it to 6% soon, said House Ways and Means chairman Murrell Smith. , a Sumter Republican.
The 6%, 5% and 4% tax brackets, or 292,000 taxpayers combined, would all be reduced to 3%. About 1 million taxpayers pay no income tax in South Carolina.
Many Republicans have been pushing for tax cuts for years, but have faced opposition from lawmakers who remember the Great Recession and the painful cuts that came when the recession left the state floundering. struggling to balance his budget.
Others have suggested that the complex system of property tax caps, sales tax exemptions and other lengthy state rules needs a complete overhaul and that the extra money in the budget provides the opportunity ideal to take the time to tear down and rebuild the entire system.
McMaster said there will be time for that later. “Don’t let the perfect be the enemy of the good,” the governor said.
It was almost all good news from the Council of Economic Advisers.
The General Assembly-controlled state budget for the 2022-23 fiscal year is expected to be around $11.5 billion. At the end of the Great Recession less than 15 years ago, the Legislative Assembly had only $5.5 billion to spend.
Lawmakers will have $4.6 billion in additional revenue to figure out how to handle this session, the Council of Economic Advisers predicted.
But there was a word of warning. The board said economists could not determine when the expected economic slowdown will occur as federal stimulus funds dwindle.
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