State Tax Relief Talks Get Serious

Dueling proposals to address South Carolina’s tax climate were released last week as lawmakers learned that the state has a more significant amount of surplus revenue than initially forecasted. On Tuesday, Governor Henry McMaster and members of House Republican leadership, including Speaker Jay Lucas (R-Darlington), Ways and Means Committee Chairman Murrell Smith (R-Sumter), and Majority Leader Gary Simrill (R-York), released a proposal that would simplify the state’s tax code and reduce the top marginal individual income tax rate.

The proposal would collapse the current six income tax brackets into two, with earners of $16,040 or less paying a rate of 3% immediately and earners of $16,040 or more paying a rate of 6.5%. Additionally, the 6.5% rate would be reduced to 6% over five years. Currently, South Carolina has the highest marginal individual income tax rate (7%) in the southeast.

Senate Finance Committee Chairman Harvey Peeler (R-Cherokee) introduced his comprehensive tax relief bill (S.1087) on Thursday with many Republican and Democratic co-sponsors. Items in his proposal include:

  • An immediate reduction of the top marginal individual income tax rate from 7% to 5.7%
  • An immediate deduction of all military retirement income from South Carolina taxable income
  • A lowering of the industrial property tax rate from 10.5% to 6% while keeping the current fee in lieu system in place
  • A Taxpayer Rebate Fund and an allocation of $1 billion to the fund for a one-time rebate to taxpayers.