H.3164 replaces the income tax with a 3.5% tax on adjusted gross income, and allows a tax forgiveness credit based on income level and dependents. The bill creates a set of income level brackets determining the percentage of the tax forgiveness credit issued.
Cutting South Carolina’s top income tax bracket (currently at 7%) in half would save citizens hundreds of millions, even billions of dollars collectively. This change would be a vast improvement over the State’s current uncompetitive income tax which imposes the highest marginal tax rate on the lowest level of taxable income in the Southeast (third in the nation), and the 13th highest income tax rate in the nation.
A significant income tax cut would boost the state’s economy by allowing citizens to keep more of their income some of which would undoubtedly be used in increased consumption and investment; both activities which could give businesses the opportunity to expand thereby creating more jobs and more wealth. Moreover, income tax cuts would also benefit some businesses in a more direct way, as the revenue of many businesses (such as S corporations) are taxed using individual income tax brackets.
H.3164 would be even better if it entirely eliminated the State’s income tax (as 7 other states have done), but even unaltered it would remain a significant improvement over South Carolina’s current tax system.
As we have summarized before, lower income taxes would mean more money in citizens’ pockets, more opportunity for job creation, smaller government budgets, less government intrusion in the economy, less government power in general — and when all this is combined, more freedom for South Carolinians.