Booming economy leads SC governor, House to bigger tax cut
COLUMBIA, S.C. (AP) — Another round of better-than-anticipated economic news in South Carolina had the Republican governor and House leaders agreeing Tuesday to work toward a bigger income tax cut than they originally proposed.
The proposal would cost $600 million next budget year and cut income taxes on all but about 120,000 of the 1.5 million people and couples who pay taxes.
“We’re in a unique situation this year. We have the opportunity to provide tax relief for every South Carolinian while still maintaining the economic success we have experienced in the past,” said House Speaker Jay Lucas, a Republican from Hartsville.
Two dozen House Republicans piled into the governor’s office Tuesday just about an hour after state economists announced South Carolina continues to grow at unprecedented rates, increasing their estimates on how much money the state should collect in taxes and other recurring money by more than $600 million for the budget year that starts in July.
That kind of growth won’t last forever — it is coming in sales taxes and corporates taxes boosted by federal stimulus and COVID-19 relief money, said state Revenue and Fiscal Affairs Office Executive Director Frank Rainwater.
But there is no question the state is also growing outside of the federal money with higher wages boosting income taxes, Rainwater said at an agency meeting Tuesday.
“The federal money did help,” the governor said an hour later. “But the conservative polices we had in this state is what allowed this to occur.”
No senators were at the governor’s news conference, but Senate Finance Chairman Harvey Peeler said in a statement later he looks forward to working with McMaster and the House on a tax cut,.
“There is no question time is here for a significant tax cut for our citizens. The projected revenue ensures that we can both fund the operations of government and ease the burden on our people,” the Republican senator from Gaffney said.
The proposal would cut the state’s highest tax bracket — which 1.1 million of the 2.6 million eligible people pay — from 7% down to 6.5% immediately, with plans to continue to cut it to 6% soon, said House Ways and Means Chairman Murrell Smith, a Republican from Sumter.
The 6%, 5% and 4% tax brackets — a combined 292,000 taxpayers — would all be cut to 3%. About 1 million taxpayers don’t pay any South Carolina income tax at all.
Many Republicans have been pushing for the tax cut for years, but have faced opposition from lawmakers who remember the Great Recession and the painful cuts that happened when the downturn left the state scrambling to balance its budget.
Others have suggested the state’s complicated system of property tax caps, sales tax exemptions and other lengthy rules needs a complete overhaul and the extra money in the budget provides the perfect chance 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 Board of Economic Advisors.
The state budget controlled by the General Assembly for the 2022-23 fiscal year is predicted to be about $11.5 billon. At the end of the Great Recession less than 15 years ago, the Legislature had just $5.5 billion to spend.
Lawmakers will have $4.6 billion in extra revenue to figure out how to handle this session, the Board of Economic Advisors predicted.
But there was a word of caution. The board said economists can’t pinpoint when the expected economic slowdown will happen as federal stimulus money subsides.
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Follow Jeffrey Collins on Twitter at https://twitter.com/JSCollinsAP.