South Carolina’s poorest residents would pay more in state income taxes while all others would pay less or no more than they do now, according to a Republican tax plan approved by a House panel Tuesday.
Right now, anyone with taxable income of $2,800 or less pays no state income tax. That covers at least 267,000 of the 2.1 million S.C. taxpayers who file state income tax returns, according to the state Board of Economic Advisors.
But a proposal that lawmakers unanimously approved Tuesday calls on those low-income residents to pay 3 percent of their taxable income to the state. That is an increase of up to $84 for those residents, depending on their taxable income.
Meanwhile, South Carolina taxpayers who now pay 4 percent, 5 percent or 6 percent of their taxable incomes would see their taxes cut to 3 percent, a savings of up to $84. That move would affect at least 185,000 people, according to the board.
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State Rep. Tommy Stringer, R-Greenville and the principal author of the tax proposal, said a person with taxable income of $2,800 could make as much as $35,000 a year.
The state’s highest-taxed earners – those with taxable incomes of $14,000 or more – would continue to pay 7 percent. (Taxable income is how much money you make in a year, minus all federal and state tax credits and deductions.)
House Republicans said 78 percent of South Carolinians who pay income taxes either would pay less or see no change under their plan. Twenty-two percent would pay more.
“No matter how you go about tax reform, there are going to be winners and losers,” said state Rep. Garry R. Smith, R-Greenville, a member of the subcommittee that approved the bill. “You try and mitigate the best that you possibly can. And I think we’ve done a pretty good job of doing that. We’re trying to make this as flat and as fair as possible.”
Democrats criticized the plan for taxing the poor to benefit those who are better off.
“That would not surprise me at all,” said House Minority Leader Harry Ott of Calhoun County. “Republicans in this state have a way of taxing working-class citizens so that rich people get a break.”
However, Stringer said the income tax bill would not cut taxes for the rich, noting the state’s highest income tax bracket – which kicks in at only $14,000 in taxable income – remains unchanged.
The income tax bill, if it becomes law, would cost the state’s general fund $51 million a year.
The proposal – which must clear a full committee, the House and Senate before it can become law – is only one of seven tax-reform bills that House Republicans want to pass this year.
A separate House subcommittee approved two other bills Tuesday, both dealing with property taxes.
The first bill would allow all businesses except utilities to pay less money in property taxes, 6 percent instead of the current 10.5 percent rate. The second bill would cut property taxes on all commercial property, including rental homes and second homes, to 5 percent from the current 6 percent rate.
Together, the bills would translate into a more than a $1 billion property tax cut for businesses. But that cut also would mean local governments – counties, cities and school districts – would have $1 billion less to operate on.
“You will see (local tax) increases to offset the losses,” said Robert Croom, deputy general counsel for the S.C. Association of Counties. “If they (local governments) can’t make up enough to make up for the loss, you will see significant service cuts.”
But Rep. Stringer said communities would see a local tax increase “only if the voters allow that to happen.”
“I mean, each of these counties have a County Council,” which can be voted out of office, he said.
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