SC House Takes Steps in Approving Comprehensive Tax Reform

The House approved two of three pieces of comprehensive tax reform package Tuesday. Both bills were passed by wide, bi-partisan margins (104-3).

“As I’ve said before, this is tax reform in support of a key part of our Republican platform’s call to ‘support a tax policy designed to help the economy grow, not stunt the taxpayer,’” said Rep. Tommy Stringer, R-Greer, the chairman of the Republican Caucus’ tax study committee. “I am here to work on behalf of the taxpayer. The two bills approved today lower and flatten our income tax and help tens of thousands of small business owners and self-employed South Carolinians.”

The package that came to the floor this week consisted of three major reforms. The first two were approved Tuesday. A third is currently on the House calendar for debate this week.

• Reduce small business “active income”. This legislation cuts the business income entrepreneurs report on their personal tax forms from 5 percent to 3 percent in a move that expects to see lower taxes paid on these returns by about $1,000. This targets South Carolinians who either own small businesses or are self-employed. This reform will be implemented over 4 years.
• Flatten the income tax. Collapse the state’s five tax brackets (3, 4, 5, 6, and 7 percent) to two (3.75 percent and 7 percent) in a move that many House members expect to make the tax code more coherent. Those in the current 3 percent bracket will be held harmless so their taxes do not increase.
• Eliminate nearly two dozen sales tax exemptions while preserving those that directly impact most South Carolinians (gasoline, food, electricity, water, medicine). This is achieved with a corresponding sales tax rate decrease to offset the increased revenue collections.

“This is the first step in a long process, and we took a major step today in simplifying our tax code for individuals and helping small business owners across our state,” according to Rep. Rick Quinn, R-Lexington. “This is not random tax tinkering. This is direct relief to our communities and our neighbors.”