SC Senate’s $1B rebate plan nixed, setting up fight with House over where millions will go
A day after the South Carolina House threw out the Senate’s medical marijuana bill, House budget writers nixed the idea of sending tax filers between $100 and $700 back through a $1 billion rebate.
That move sets up a fight between the two chambers over how to spend hundreds of millions of dollars in the state’s annual spending plan when the two chambers meet in a conference committee.
House budget writers on Thursday took the Senate version of a $1 billion tax cut with the $1 billion tax rebate, and replaced it with the House tax cut plan.
House members previously adopted a plan that immediately reduces the top income tax rate to 6.5% from 7% and then further reduces the rate to 6% over the course of five years if revenues to the state grow by at least 5% a year. The plan also collapses the other income tax rates into one 3% bracket.
“It creates accountability, it creates sustainability and certainly protects core functions of government as well,” said House Majority Leader Gary Simrill, R-York.
The first year of the House tax cut keeps about $600 million out of state coffers. Once the tax cut is fully implemented, about $1 billion would be kept out of the state coffers.
The Senate version immediately cuts $1 billion of taxes by reducing the top rate to 5.7% from 7%, and reducing the manufacturing property tax rate.
Both versions would make all military retirement income tax deductible.
Simrill argued that people with less than $50,000 of taxable income would save more money under the House plan, and once the House plan is fully implemented, people with less than $100,000 of taxable income would fare better under the House plan.
The rebate debate
Gov. Henry McMaster on Wednesday told reporters he favors the House version of the tax cut without a rebate.
“I don’t know if that’s the best way to do it. It throws the budget out of sync a little bit,” McMaster said of the Senate plan. “(The Senate) wants to give money back to the people. I think it’s important not to take it from them in the first place. Both bills have that feature in there because of that I think the House bill is the better bill.”
The rebate plan bogged down Senate budget discussions last week as members representing Horry County tried to convince members to use the rebate money to set aside $300 million for a construction of a leg of Interstate 73, as well as dollars for other road work, teacher bonuses and state employee bonuses.
State Sen. Stephen Goldfinch, R-Georgetown, who advocated for using money to build I-73 rather than a rebate, even said during the budget debate that insistence on a rebate could hold up any budget agreement with the House and force a continuing resolution, holding up raises for state employees and law enforcement, potential raises for teachers and funding for lawmaker projects, among other things.
After the House Ways and Means committee rewrote the tax cut legislation taking out the rebate, Goldfinch tweeted “I wish someone would’ve warned us about this.”
Disagreements on how to carry out an income tax cut and whether to include a rebate could further sour the relationship between the House and Senate.
The House on Wednesday threw out medical marijuana legislation because it had a tax component, which opponents of the bill said needed to start in the House.
“This is likely going to have a strong reaction from the Senate, I suspect,” Senate Majority Leader Shane Massey said Wednesday. “This could have significant consequences on the relationship between the House and Senate.”
This story was originally published May 5, 2022 at 1:02 PM with the headline "SC Senate’s $1B rebate plan nixed, setting up fight with House over where millions will go."
