The South Carolina House has approved a bill that would cut income taxes on small businesses in the state. Legislators voted 104-3 Tuesday to trim the small business income tax rate from 5 percent to 3 percent.
The House also passed a bill that would collapse the state’s six income tax brackets into three– resulting in a cut for most people. That bill passed by the same margin after members approved an amendment that would delay its implementation for a year.
Both bills are the only parts of the House GOP tax reform proposal to make it out of the body so far, but they will struggle to pass through the procedural hurdles of the state Senate
Budget advisors predict the two bills would cost the state over $93 million in uncollected tax revenue per year. Democrats initially opposed collapsing the personal income tax brackets until a late amendment was added that would make the changes take effect next year rather than immediately. That eased concerns over how the tax cuts would be paid for in this year’s budget.
But supporters said the state could handle the lost revenue regardless, “Any tax reform bill requires you to make a decision,” said the proposal’s main sponsor Rep. Tommy Stringer (R-Greer), “That decision requires you to either be on the side of the taxpayer or on the side of the people spending the money. And I chose long ago… to be on the side of the taxpayer.”
However, he said he thinks the lower taxes would encourage growth and would increase revenue in the long-term.
Rep. Seth Whipper (D-North Charleston) disagreed, saying state government services are already underfunded. “We are having a lot of stress on our public education system,” he said, “I’m concerned that I’m taking money out of the public trough just to go play with.”
Whipper abstained from voting. Three Democrats (Reps. Boyd Brown, Kevin Johnson, and Ronnie Sabb) did vote against the final versions of both bills.
Both measures face very uncertain futures in the Senate, where they still have to navigate through committee and can be held up by a single member once they do reach the floor.