South Carolina to take another look at tax policy

South Carolina to take another look at tax policy
September 26 07:03 2018 Print This Article

The South Carolina House of Representatives is forming a committee to take another look at reforming the state’s tax code next month. A similar committee formed last year led to a recommendation to lower the state’s sales tax rate from 6% to 3% and lower the personal income tax rate from 7% to 5%. The rate reductions would have been offset by removing sales tax exemptions in categories such as consumer services, unprepared food and medicine. The South Carolina Revenue and Fiscal Affairs Office revealed last year that only 35.5% the nearly $155 billion in personal consumption in the state was taxed in 2014. The tax reform effort yielded no legislation last year.

A recent analysis of 2017 data from the U.S. Census Bureau revealed that South Carolina’s Median Household Income (MHI) of $50, 570 still lags behind 2007 pre-recession levels. The national MHI came in at $61,373, an all-time record high. South Carolina ranks 43rd nationally in MHI. Corporate incentives to companies like Boeing and Volvo have not had a significant impact on how much average families in the state earn.

South Carolina’s 7% personal income tax rate ranks as the highest in the Southeast and tied for the ninth highest nationally. There are nine states which have no personal income tax. The Tax Foundation ranks South Carolina 37th in its annual State Business Tax Climate Index. South Carolina families are likely to realize a substantial increase in take-home pay in 2018 due to the federal Tax Cuts and Jobs Act, which took effect January 1, 2018. The interesting thing to note is the reduced tax rates have led to increases in personal and corporate tax revenue, according to an analysis by The Tax Foundation. Increases in take-home pay are also leading to increases in state and local sales tax revenue. It is similar to the dynamic produced after the federal tax cuts took full effect in 2003, and South Carolina yielded a windfall in state personal income tax and sales tax revenue.