McMaster calls Trump’s tax reform “a great victory” for taxpayers
More than 1 million S.C. taxpayers likely will pay less in state income taxes next year after the House voted overwhelmingly Wednesday to align the state’s tax code with federal tax changes made last year by Congress.
Roughly the same number of South Carolinians will see no change in their taxes. Meanwhile, more than 300,000 filers — mainly those making more than $150,000 a year — most likely will see a tax increase, according to a S.C. Revenue and Fiscal Affairs Office analysis.
Without the changes, South Carolina’s tax system would go from one of the simplest in the country to one of the most complex, lawmakers had warned. S.C. taxpayers and businesses also would have faced tax hikes stemming from the new federal tax law.
“Although tax conformity is an issue the General Assembly addresses every year, the recent federal tax overhaul necessitated additional action to keep more hard-earned money in the pockets of South Carolina taxpayers,” House Speaker Jay Lucas, R-Darlington, said in a statement. “Today’s legislation streamlines filing and ensures families will continue to benefit from our state’s tax-friendly environment.”
Without changes to the state’s tax law, legislators said S.C. taxpayers would be hard hit by the changes in the federal tax law — including repealing personal exemptions — since the state’s tax code is tied to that law. Simply conforming the state’s tax code to new federal tax law would have cost S.C. taxpayers an additional $253 million in taxes, according to the Revenue and Fiscal Affairs Office.
“By relying on outdated withholding tables, countless tax withholding and estimated tax payments could be drastically over- or under-paid,” S.C. trade groups, including the state Chamber of Commerce, warned the Senate Finance Committee in a Sept. 26 letter. “That could result in taxpayers owing unexpected liabilities when filing their 2018 returns and then discovering they do not have the funds available to pay for them.”
The bill passed by the House and state Senate:
▪ Adds a $4,110 state tax deduction for dependents, starting with the current tax year. It also adds another $4,110 deduction for each child under 6 years old, meaning the parents of a toddler could get an $8,220 exemption.
▪ Increases standard deductions to mirror federal law, with deduction amounts increasing to $12,000 for individuals, $18,000 for heads of household and $24,000 for married couples filing jointly.
▪ Indexes to inflation individual state income tax brackets, up to a 4 percent cap, starting in 2019. That will save taxpayers $4 million a year, money that otherwise would have gone into the state’s general fund.
The bill now goes to S.C. Gov. Henry McMaster, who has said he plans to sign it into law before the end of this week.