South Carolina Senate finance committee chairman Harvey Peeler rolled out a proposed broad-based individual income tax cut this week, one which would slash the state’s top marginal rate from seven percent to 5.7 percent – immediately.
That cut, which would apply to 2021 income, is deeper than the incremental reduction unveiled earlier this week by the S.C. House of Representatives – which would cut the top marginal rate to 6.5 percent immediately and then trim another half-percentage point over the next five years. The proposal is also significantly deeper than the utterly impotent cut proposed back in January by “Republican” governor Henry McMaster.
Peeler’s plan – contained in a standalone piece of draft legislation (S. 1087) – was introduced with the support of 28 state senators (including a handful of Democrats). Given that there are only 46 seats in the Senate chamber, that means the legislation’s chances of passage are most promising indeed.
The legislation containing the cut was also referred to the finance committee, which Peeler chairs following the death of senator Hugh Leatherman last fall. Leatherman – a big government liberal – would have never allowed a tax cut like this to clear his committee.
In addition to cutting the state’s top marginal rate – which would apply to all income above $12,820 – Peeler’s plan would create new tax brackets for lower levels of income. Specifically, income below $3,200 would not be taxed by the state, while income between $3,200 and $6,410 would be taxed at three percent. Income between $6,410 and $9,620 would be taxed at four percent and income between $9,620 and $12,820 would be taxed at five percent.
Take a look …
$0 – $3,200: 0 percent
$3,200 – $6,410: 3 percent
$6,410 – $9,620: 4 percent
$9,620 – $12,820: 5 percent
$12,820 – or more: 5.7 percent
Initial estimates are that the Senate plan would provide up to $1 billion in immediate relief – well above the $600 million in up-front relief offered by the House and more than five times the paltry $177 million offered by the governor.
Is that good? Yes, although let’s be clear: These three plans hardly constitute a “good, better, best” scenario. In fact, we are basically talking about degrees of insignificance when compared to what South Carolina’s neighboring states are doing on taxes.
Back in December, I penned a column discussing the latest round of tax relief being implemented in North Carolina – a state which is sending a whopping $13 billion back to its citizens over the next five years.
North Carolina’s latest rate reduction plan – approved last fall – will take its top marginal rate all the way down to 3.99 percent by 2027, further underscoring the need for South Carolina to take action.
In previewing Peeler’s proposal earlier this month, I noted that “anything short of an immediate two percentage point reduction in the state’s onerously high top marginal rate is going to be insufficient in light of the massive tax cut North Carolina is currently implementing.”
Also, the Palmetto State is going to have to keep up in cutting taxes if it wishes to stay competitive.
South Carolina has a lot of ground to make up, and it is going to take more than half-measures to revive its moribund economy (and in particular its lagging employment economy).
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ABOUT THE AUTHOR …
(Via: FITSNews)
Will Folks is the founding editor of the news outlet you are currently reading. Prior to founding FITSNews, he served as press secretary to the governor of South Carolina. He lives in the Midlands region of the state with his wife and seven children. And yes, he has LOTS of hats – including that Asheville Tourists’ lid pictured above.
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