October 7, 2022

The Nerve

Where Government Gets Exposed

Compromise bill reflects SCPC poll results on tax relief

By RICK BRUNDRETT

Just days before a legislative conference committee approved a compromise tax-cut bill, South Carolinians expressed strong support for tax relief in a poll released by the South Carolina Policy Council – The Nerve’s parent organization.

Contacted last week by The Nerve before the deal was announced, several senators who co-sponsored the original bill were asked about their views on the poll results and the legislation. A Democratic senator recommended, for example, that part of the state’s massive surplus be used to cut corporate income taxes to attract companies to small counties that have lost population.

The random sample of 606 likely S.C. voters, who were surveyed from May 31 to June 3, found that a collective approximately 47% of respondents favored permanent state income-tax cuts or one-time rebates compared to about 38% who supported increased government spending in areas such as education, transportation and health care.

For those responses, likely voters were asked what they think should be the higher priority for state lawmakers in deciding what to do with a current several billion-dollar surplus.

In a related matter, about 78% of respondents said cutting taxes was important for the state to remain competitive, with 54% saying that income tax cuts were very important. Likely voters were asked how important they thought it was for lawmakers to reduce income tax rates.

“South Carolina voters clearly understand that the Palmetto State has to enact bold tax relief and reform to compete for jobs and industries with all our neighboring states that have lower or no state income tax,” said SCPC executive director Dallas Woodhouse. “Lawmakers are making a great first step, and there is broad support for their actions.”

The poll, conducted by Tennessee-based Spry Strategies, sought responses to questions in a variety of areas, including – besides tax cuts – inflation, energy independence, election reform and confidence, school choice and school board transparency. The margin of error was a plus or minus 4 percentage points.

Complete results of the South Carolina Policy Council’s poll can be found here.

Last Friday, a House-Senate conference committee announced it had reached a deal on an amended Senate tax-cut bill. The conferees agreed to a one-time rebate to taxpayers – with a maximum individual rebate of about $800 to eligible taxpayers, to be paid in November or December – combined with lowering the top individual income-tax rate to 6.5% from 7% and gradually reducing the rate to 6% over five years if the economy stays healthy, according to a State newspaper story.

Budget records show that for the fiscal year that starts July 1, the one-time rebate and initial tax-rate cut collectively will cost $1.7 billion out of a total $6.5 billion in surplus recurring and nonrecurring state funds. The state’s total fiscal 2022-23 budget, which includes state, federal and “other” funds, is $38.1 billion, according to a conference committee version.

‘So much money out there’

Two of the sponsors of the original Senate tax-cut bill – Republican Sens. Josh Kimbrell of Spartanburg and Katrina Shealy of Lexington – told The Nerve when contacted last week they believe it’s important to provide tax relief this year with surplus money.

“We have so much money out there right now, and I think people are better stewards of their own money than we are,” said Shealy, who is a Senate Finance Committee member and also chairs the chamber’s Family and Veterans’ Services Committee. “If we put the money back in their pockets, they’re going to spend it … and it’s going to go back into the economy.”

Still, she cautioned, lawmakers need to be “frugal” at the same time with the extra tax dollars, adding that the Great Recession of 2007-09 was “like a nightmare.”

“It’s the right thing to do in the face of significant inflation we’re seeing nationally to provide as much relief as we can at the state level,” said Kimbrell about the compromise bill. “I think the combination of permanent rate reductions and a rebate is the right approach.”

Kimbrell said he has “long advocated” for a “complete repeal” of the state income tax, though he added that “it’s not feasible at the moment.”

Nine states have no individual income tax or tax only certain types of investment income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, according to the Forbes and Investopedia websites.

Contacted last week, S.C. Sen. John Scott, D-Richland, who is a member of the Senate Finance Committee, told The Nerve although he supports using one-time, nonrecurring surplus money for individual tax rebates, he believes that new recurring dollars should be committed primarily to cutting the corporate income-tax rate, which currently is 5%.

“We’ve got to look at those counties that have lost population,” Scott said, noting more than 20 mostly small, rural counties lost population in the latest U.S. Census. “I want to give the tax break to all corporations because smaller corporations don’t come unless they feed into the larger corporations.”

Scott said he also would give other types of tax incentives to “those smaller corporations that will locate in those counties that have last population.”

He added, though, he thinks lawmakers should carry forward as much as the surplus as possible into next year, noting, “The larger the carry forward, the better it is for next year in case the economy goes into a recession.”

Assuming the full Legislature, which reconvenes today, gives final approval to the compromise tax-cut bill, it will go to Republican Gov. Henry McMaster, who publicly has supported tax relief plans.

Brundrett is the news editor of The Nerve (www.thenerve.org). Contact him at 803-3948273 or rick@thenerve.org. Follow him on Twitter @RickBrundrett. Follow The Nerve on Facebook and Twitter @thenervesc.

Nerve stories are free to reprint and repost with permission by and credit to The Nerve.

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