Gov. Henry McMaster has signed into law a bill meant to conform South Carolina’s tax code to the new federal tax cuts, potentially saving families and businesses a collective $205 million next year.
The governor signed the law Wednesday, only a few hours after the state House voted 117-0 in favor of the legislation. The Senate had approved it a day earlier.
When Congress passed the Tax Cuts and Jobs Act in December, it removed the personal exemption and eliminated dozens of other deductions in order to lower the overall rate. But the changes meant South Carolina’s system — based on the old law — was no longer in line with the federal changes. As a result, residents faced potentially higher state taxes to the tune of about $205 million (although their taxes would have still declined overall when combined with federal).
“If you look at the overall tax burden, we wanted to make sure that government coffers did not increase,” House Majority Leader Gary Simrill, R-Rock Hill, said.
Budget analysts predict roughly 44 percent of taxpayers will pay less this year under the law, while another 44 percent will pay the same. Slightly more than 12 percent of taxpayers could be facing an increase in state taxes this year.
“Because of the federal tax plan, the majority of South Carolinians would actually have their (state) taxes go up without this,” State Rep. Russell Ott, D-St. Matthews, said.
House leaders also warned tax filing would be much more difficult next year without the change, since taxpayers would no longer simply be able to transcribe their federal taxable income onto their state forms.
Legislators voted to create a $4,110 exemption for each dependent to help offset the potential tax increase. A filer could claim a second $4,110 exemption for a child under age 6.