The financial leader in the South Carolina Senate proposed nearly $2 billion in income tax cuts and rebates on Thursday, adding an even larger number to the debate on cutting taxes heating up in the General Assembly.
Nearly everyone who pays income taxes in South Carolina would get something back under Senate Finance Committee Chairman Harvey Peeler's proposal.
The plan would drop the state's top tax rate of 7% down to 5.7% when people file their returns next year. That would cost nearly $900 million.
Peeler also wants to give $1 billion of one-time rebates to taxpayers, but the Gaffney Republican said he is still working on those details.
Peeler's plan came two days after House members joined Gov. Henry McMaster with their own plan to cut the top rate — which more than four out of 10 state taxpayers pay — from 7% to 6.5% now and eventually to 6%. It would also push all other taxpayers into the lowest 3% bracket, altogether costing about $600 million. It was a bigger initial cut than either the governor or House leadership initially proposed.
Peeler said he has been working on a tax cut plan since becoming Senate Finance chairman in December and has been pushing for them most of his 40 years in the Senate. But he did wink at Tuesday's announcement by the governor and House members that included no senators.
"You can't out tax cut Harvey Peeler, so let's get down to the negotiation table," he said.
Peeler's plan also had something the other announcement didn't have — Democrats. At least three Democratic senators immediately asked to be co-sponsors of the bill after Peeler introduced it.
The escalating tax cut proposals happened in the same week that state economists predicted there will be an extra $1.5 billion to spend in next year's state budget thanks to unprecedented increases in sales tax and corporate tax collections.
Lawmakers already were trying to figure out how to spend $3 billion extra dollars from money saved in case COVID-19 wrecked the economy and even more tax collection windfalls.
McMaster and House Speaker Jay Lucas said they were both thrilled to see the Senate enter the debate with its own proposal.
"The time for this proposal is now — and we are one step closer to making it a reality as the Senate joins in the ongoing conversation," said Lucas, a Republican from Hartsville.
A spokesman for McMaster said the governor is glad to see both chambers of the General Assembly joining the tax cut call he has made for five years.
"If a tax cut gets to his desk, he'll sign it into law, and then he'll push for even more cuts," spokesman Brian Symmes said.
Democratic Rep. Gilda Cobb-Hunter said she hopes Republicans will not just focus on income tax cuts, but other relief like an earned income tax credit or tax credits for child care.
"Democrats are all for tax relief. It just depends on what kind," she said.
While tax cuts appear popular apparently with lawmakers in both parties, some in the General Assembly want to do more.
Sen. Sean Bennett said he appreciated Peeler's tax cut plan, but said the booming economy and extra revenue gives the state a transformational chance to alter all kinds of taxes to align with how the economy works today.
"Our income tax is broken, Our property tax is broken. Our sales tax is broken, Let's not miss this opportunity. Don' swim after the shiny lure," the Summerville Republican said on the Senate floor Wednesday.
Backing that call was Democratic Sen. Mike Fanning of Great Falls, who said the state could cut the top income tax rate to 4% paired with a number of income tax exemptions and still collect about the same amount of revenue.
"If we were to tackle comprehensive tax reform, would you not agree, we could lower not just the income tax rate to the lowest in the county, but we could reduce every one of our rates?" Fanning said.
Peeler said he will listen to any proposal that ends up cutting taxes. But he doesn't want to delay an income tax beyond this session, which ends in May.
"This is the act of the possible," Peeler said. "We can do this now."
Cobb-Hunter said she hopes all the tax cut talk doesn't lead lawmakers to a bidding war on which chamber can provide the bigger giveback, taking away money from all the other needs in the state from education to health care to her personal crusade to pay all state employees more, especially those paid the least.
"I'm not just talking a raise this year for state employees, I'm talking bonuses too," the Orangeburg Democrat said. "Because they are the ones doing all the work."
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