SC residents to get a tax cut as part of upcoming budget. Here are the details

South Carolina residents will see a larger income tax cut this year than originally scheduled, under a spending plan approved by budget negotiators and now headed to the entire general assembly for its OK.

Under the plan put forward Friday, the state’s top income tax rate will go down to 6.2% this year. The income tax cut will cost the state about $99.5 million a year.

The tax cut is part of a nearly $14.5 billion spending plan approved Friday by a budget conference committee. The General Assembly is scheduled to return Wednesday to vote on the budget.

The state’s top income tax rate is currently 6.3% and the cut to 6.2% was planned for next calendar year if revenue to the state is high enough. The step-by-step reduction in the income tax rate is part of a phased-in cut that will bring the maximum income tax rate to 6%.

Money for the tax cut is coming from surplus sales tax dollars that have accumulated since 2020.

In 2006, the state sales tax increased to 6% from 5% in exchange for cutting property taxes on owner-occupied houses in half. However, money in the property tax relief fund has accumulated to $600 million since 2020, the first year the account had a surplus. Because only $100,000 in surplus dollars had been accumulated at that point, the relief would not be noticeable to homeowners and the money wasn’t immediately distributed.

With $600 million available, Gov. Henry McMaster called on lawmakers to use the money on bridge repairs, originally slated for slated for property tax relief.

Budget writers also used the cash to pay for bridges, infrastructure, county transportation committees and rural roads, including $200 million for bridges and $200 million for county transportation committees.

“With that much money going into county transportation committees, we should not have potholes in our districts,” Senate Finance Chairman Harvey Peeler said. “If you continue to have potholes in your district, you need to take a look at you county transportation committee. They’re not doing their work.”

The Senate pushed for the income tax cut, a move supported by the governor.

The House had proposed spending only $150 million on a property tax cut that would have been in place for at least 10 years, but questions came up about whether the money would be sustainable and could lead to the appearance of property tax increases in subsequent years.

“We heard a lot from the county assessors on what a property tax (cut) would do if we weren’t sure it was going to happen every year, and by locking in the income tax cut we know that’ll happen and that we maintain over a period of time and after discussions with the Senate and the governor that just we decided that made really good sense to do it that way,” said House Ways and Means Chairman Bruce Bannister.

S.C. Rep. Bruce Bannister, R-Greenville presides over the Ways and Means Committee after being elected chairman on Wednesday, Dec. 7, 2022.
S.C. Rep. Bruce Bannister, R-Greenville presides over the Ways and Means Committee after being elected chairman on Wednesday, Dec. 7, 2022.