COLOMBIA, South Carolina
Many South Carolina taxpayers could soon get hundreds of dollars in tax rebates on top of a reduction in their regular tax rates after a group of powerful House and Senate lawmakers agreed to a compromise on Friday. on the state budget.
State lawmakers have $13.8 billion to spend on the plan that begins July 1 thanks to a booming economy, federal pandemic money and savings from the last two budgets in case COVID- 19 would destroy the financial system.
Along with the tax cut, the plan raises the minimum wage for teachers from $36,000 to $40,000, invests another $1 billion in road repairs and expansion, gives state employees a raise 3% and a $1,500 bonus, raises a number of state law enforcement salaries, gives colleges money if they freeze tuition, and sets aside about $1 billion dollars in case this is the year the economy explodes.
“We have made substantial investments in South Carolina. One billion in reserves, $1 billion in roads and $2 billion in tax relief,” Republican House Speaker Murrell Smith said.
The General Assembly returns on Wednesday to consider the final budget plan.
The centerpiece of the budget is tax cuts and refunds. Every South Carolina who pays income tax should recoup that amount for that 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 receive a check when the rebates come in November or December. Refunds will cost around $1 billion.
The original refund plan passed by the Senate offered everyone who filed income taxes a refund whether they paid or not, noting that those people also paid sales taxes and other funds to the accounts of the government.
“Everyone has their skin in the game, but this is an income tax refund and therefore no income tax, no refund,” said House Ways and Means chairman , Gary Simrill, who called it the fairest solution.
The compromise also immediately cuts the top state tax rate from 7% to 6.5%. for the 1.1 million taxpayers who pay the most. The plan then removes 0.1% of the maximum rate each year, with the state continuing to significantly increase revenue until the maximum rate is 6%. This is the house plan supported by Governor Henry McMaster.
The other tax bracket will be 3%, reducing taxes for more than 300,000 taxpayers currently between the 6% and 3% brackets. Anyone below this amount will not pay taxes at all.
“A taxpayer knows better what to do with his money than the government does,” Simrill said.
The budget compromise also revamps the way the state funds education, simplifying a complex money formula primarily based on student-teacher ratios and minimum teacher salaries.
Lawmakers want to invest $275 million more in the formula. Senate Finance Committee Chairman Harvey Peeler said districts can use the money as they see fit, suggesting a $4,000 pay raise for all their teachers was a good start.
“There’s nothing stopping them from increasing it even more,” Peeler said.
On the roads, most of the money will accelerate major interstate projects, like widening Interstate 26 from Charleston to Columbia to three lanes in each direction or unraveling where Interstates 20, 26 and 126 meet west of Columbia.
But Smith said the budget also helps small counties and roads. Sumter County where he lives will receive $8 million for projects when it usually receives only half of that.
“We’re going to take care of local areas and also fix our highways,” Smith said.
The four Republicans and two Democrats on the conference committee praised each other for their work. It was Peeler’s first budget after more than 40 years in the Senate and Smith was promoted to Speaker of the House last month after guiding spending plans across the House since 2018.
The income tax cut is less than the immediate 5.7% cut originally proposed by Peeler. The house plan initially had no refunds, while Peeler introduced his plan saying “you can’t cut Harvey Peeler’s taxes”.
“So far they can’t,” Peeler said when reminded of his quote on Friday.
Follow Jeffrey Collins on Twitter at https://twitter.com/JSColinsAP.