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Democrats and Republicans praise tax cuts in South Carolina

Income Tax Cut
Jeffrey Collins/AP
/
AP
South Carolina House Majority Leader Gary Simrill, R-Rock Hill, talks about a plan to cut income taxes on Wednesday, Feb. 23, 2022, in Columbia, S.C. (AP Photo/Jeffrey Collins)

The Republican-dominated South Carolina House unanimously passed a $600 million income tax cut Wednesday in less than 15 minutes of debate with much of that time spent by Democrats praising the idea.

Between the booming state economy and money saved from previous budget years in case the pandemic caused an economic collapse, South Carolina lawmakers have an extra $4.5 billion to spend this session.

With all that money, there have been calls to build new schools and a new state health lab, increase salaries for teachers and other state employees and accelerate plans to widen South Carolina's cramped interstates. But nothing so far has had the kind of support as the income tax cut.

"This is the best thing since sliced bread for the working man in South Carolina," said Democratic Rep. David Weeks of Sumter.

The House plan cuts the states top income tax rate from 7% to 6.5% next year and continues to reduce it to 6% over the next five years if the economy continues to grow. About 1.1 million of the state's 2.6 million eligible people pay that rate. All other taxpayers would be combined into a 3% bracket.

Republican House leaders joined Gov. Henry McMaster in his office Feb. 15 to announce their plan. They finished eight days later.

"It's the middle earners that get the biggest decrease. I think for us it's a true win," said House Majority Leader Gary Simrill, a Republican from Rock Hill.

The proposal heads to the Senate, where Finance Committee Chairman Harvey Peeler has suggested an even bigger cut — spending $2 billion to cut the 7% top income tax rate to 5.7% and also send back $1 billion in state revenue as rebates with the exact details to be determined.

"You can't out tax cut Harvey Peeler, so let's get down to the negotiation table," the Gaffney Republican said last week.

Many Republicans in South Carolina have wanted tax cuts for more than a decade. But their more cautious colleagues always won out by saying the state had too many needs to cut revenue, citing examples like Kansas, where tax cuts passed a decade ago were repealed just a few years later after causing massive budget shortfalls.

In the past 10 years, South Carolina has added 500,000 people and many of them have been well off. The median household income climbed from $43,000 to more than $56,000 in that same period.

The amount of money the state collects yearly in taxes and fees and the General Assembly can spend next budget year is $11.5 billon. At the end of the Great Recession less than 15 years ago, the Legislature had just $5.5 billion to spend.

There also have been calls to tie tax cuts to reforming the state's entire tax system with dozens of sales tax exemptions and a property tax cap that has many longtime property owners paying taxes well below their rapidly increasing home values. But that appears to be waiting for another year.

South Carolina wasn't the only Southern legislature taking up taxes Wednesday. The Mississippi Senate is considering a proposal to cut the state income tax, while Republicans in the Mississippi House have their own bill to eliminate the income tax entirely.

There is more opposition to the idea there, with critics saying Mississippi can't afford to cut taxes because it chronically underfunds its schools and is facing big financial obligations to improve its mental health and foster care systems — arguments heard in South Carolina in previous years.

South Carolina lawmakers are also trying to decide to spend an additional $2 billion in federal COVID-19 relief and fines the U.S. government owed the state after failing to meet deadlines to remove plutonium from the Savannah River Site after a plan fell through to turn the radioactive material in nuclear bombs into nuclear reactor fuel.

All that extra money left Democrats feeling like their concerns for educations, schools, state employee salaries and other needs would still be met even with the tax cut.

Democrats and Republicans in the House gave Republican leader Simrill and House Ways and Means Committee Chairman Murrell Smith a rousing round of applause after 110-0 vote.

As soon as the vote started, dozens of names lit up in green on the board and House Republicans achieved what they wanted for nearly 20 years.

"I don't know, Murrell. Looks close," joked Rep. Kirkman Finlay, a Republican from Columbia.

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