Income tax cuts, rebates centerpiece of SC’s $13.8B budget
COLUMBIA, S.C. (AP) — Many South Carolina taxpayers may soon be getting several hundred dollars in tax rebates on top of a cut in their regular tax rates after a group of powerful lawmakers from the House and Senate agreed Friday to a compromise on the state budget.
State lawmakers have $13.8 billion to spend in the plan that starts July 1 thanks to a booming economy, federal pandemic money and savings from the past two budgets just in case COVID-19 wrecked the financial system.
Along with the tax cut, the plan raises the minimum salary for teachers from $36,000 to $40,000, puts $1 billion extra into road repair and expansion, gives state employees a 3% raise and $1,500 bonus, raises a number of state law enforcement salaries, gives colleges money if they freeze tuition and sets aside about $1 billion in case this is the year the economy craters.
“We have made substantial investments in South Carolina. A billion in reserves, $1 billion in roads and $2 billion in tax relief,” Republican House Speaker Murrell Smith said.
The General Assembly returns Wednesday to consider the final budget plan.
The centerpiece of the budget is the tax cuts and rebates. Every South Carolinians who pays income tax should get that amount back for this tax year, up to about $800. About 44% of the state’s 2.5 million people who file returns end up paying nothing in income tax and won’t get a check when the rebates are given out in November or December. The rebates will cost about $1 billion.
The original rebate plan passed by the Senate provided everyone who filed income tax a rebate whether they paid or not, noting those people also paid sales taxes and other money into the government’s accounts.
“Everyone has skin in the game but this is an income tax rebate and so no income tax, no rebate,” said House Ways and Means Chairman Gary Simrill, who called it the most fair solution.
The compromise also immediately cuts the state’s top income tax rate from 7% to 6.5%. for the 1.1 million taxpayers who pay the most. The plan then knocks 0.1% off the top rate each year the state continues to substantially increase revenues until the top rate is at 6%. It is the House plan backed by Gov. Henry McMaster.
The other tax bracket will be at 3%, cutting taxes for the more than 300,000 taxpayers now between the 6% and 3% brackets. Anyone lower than that will not pay taxes at all.
“A taxpayer knows better what to do with their money than the government does,” Simrill said.
The budget compromise also revamps the way the state funds education, simplifying a complex formula into money mostly based on student-teacher ratio and minimum teacher salaries.
Lawmakers want to put $275 million more into the formula. Senate Finance Committee Chairman Harvey Peeler said districts can use the money however they like, suggesting a $4,000 salary increase for all their teachers is a good start.
“Nothing is keeping them from raising it even more,” Peeler said.
On roads, most of the money is going to accelerate major interstate plans, like widening Interstate 26 from Charleston to Columbia to three lanes each direction or untangling where Interstates 20, 26 and 126 all meet west of Columbia.
But Smith said the budget helps out smaller counties and roads, too. Sumter County where he lives will get $8 million for projects when it typically gets only half of that.
“We’re going to take care of the local areas and also fix our interstates,” Smith said.
The four Republicans and two Democrats on the conference committee praised one another for their work. It was Peeler’s first budget after more than 40 years in the Senate and Smith was promoted to House Speaker last month after guiding spending plans through the House since 2018.
The income tax cut is less than the immediate reduction to 5.7% that Peeler initially proposed. The House plan initially had no rebate, while Peeler introduced his plan by saying “you can’t out tax cut Harvey Peeler.”
“So far they can’t,” Peeler said when reminded of his quote Friday.
Follow Jeffrey Collins on Twitter at https://twitter.com/JSCollinsAP.