2 weeks Ago
Our General Assembly is debating various changes to our state’s income tax system. Meaningful changes are required if our state is to remain competitive with other Southeastern states. Neighboring Georgia and North Carolina are much more income taxpayer-friendly while Florida and Tennessee do not burden their citizens with income taxes.
Mississippi and Kentucky are headed in that direction. In 2022, South Carolina made some reforms to its income tax system when it reduced its six brackets to three and set in motion the reduction of the 7% bracket to 6% over a number of years. The top bracket rate for 2025 is 6.
2% on net taxable income of $17,330 or more for a married couple filing jointly. That is progress. However — and this is a big however — it is not nearly as meaningful as getting real about the impact of inflation on those tables since 1959 when they were established.
The top 1959 7% bracket was reached at $10,000, and if we adjust for inflation using the Consumer Price Inflation calculator, we discover that in 2024 dollars it wouldn’t be reached until taxable income hit $107,719. If we make the same calculation for the 1959 6% bracket, it would require an income of $86,175 to reach that bracket. Without getting too deep in the weeds, we now know that taxpayers ought not reach the present 6.
2% bracket until their taxable income is around $90,000. Making it so would actually be meaningful reform, while reducing the rate by 0.1% and keeping the threshold at $17,330 is not meaningful.
A proper inflation adjustment is required. Carr Doing so would reduce income tax revenue, but that lost revenue could easily be made up through other much-needed reforms. For example, South Carolina is among the most crony capitalist states in the nation.
Millions and even billions of dollars are lavished on big and mega businesses seeking to set up shop in South Carolina — deals that are typically unavailable to small, medium and even most large businesses, and it is those smaller business that end up picking up most of the tab for those lavish subsidies. South Carolina needs to exit the business of crony capitalism. Another reform that wouldn't affect taxes but would allow lawmakers to better spend our taxes would be to permanently eliminate budget earmarks.
They essentially are a means for members of the General Assembly to access and use state tax money as a slush fund for pet projects or organizations in their districts. Why should Lowcountry taxpayers fund a festival in the Upstate, and Upstate taxpayers do likewise for a Lowcountry festival? They shouldn’t. Unfortunately for taxpayers, the list of inappropriate and sometimes nonsensical earmarks would likely fill the rest of this page.
The General Assembly needs to get serious and enact meaningful tax and other policy reforms now. Walter Carr a real estate broker and owner of Carr Properties in Charleston..
