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Tax Bills Advance to Senate

Tax reform took a major step toward reality this week as the House Republicans ushered through three major pieces of our comprehensive tax reform package – returning $143 million to working families and small business owners.

This was “Crossover Week” in the General Assembly. Crossover is a May 1st deadline that means a bill originating in one body must be received in the other body by the Deadline to receive normal consideration for that year’s session. This establishes a set workload for each body going into the final weeks of the session. Legislation can be considered after the deadline, but the receiving body must take a 2/3 vote to be able to even take up legislation sent after the deadline. 

Crossover Week is a busy week as everyone in the House wants to ensure their legislation has a chance to at least be heard on the floor of the House. We debated more than 60 pieces of legislation this week, which resulted in three long days on the House floor.

 But enough about “How a Bill Becomes a Law” and back to the tax reform laws approved this week.

 We hoped to accomplish a little more on the tax reform front this year, but approving these three bills is a major step forward in our goal of statewide comprehensive tax reform. The Caucus built bi-partisan support for cutting taxes on small businesses, cutting income taxes, and streamlining our sales tax exemptions. This was excellent work for the first year of this process.

 The three bills approved this week were submitted by the Republican Caucus Tax Reform Study Committee, which met throughout the off-session in 2011 to study the tax code and make recommendations that could become actionable legislation. Seven pieces of legislation were drafted (several had duplication for procedural reasons). The three that came to the floor this week were:

  • Slashing small business “active income”. This piece of legislation slashes the business income entrepreneurs report on their personal tax forms from 5 percent to 3 percent so they can invest in, and grow, their businesses. This should lower the average tax paid on these returns by about $1,000. This directly helps thousands of South Carolina families who either own small business or are self-employed. This reform will be implemented over 4 years.
  • Flatten the income tax. We collapse our five tax brackets (3, 4, 5, 6, and 7 percent) to two (3.75 percent and 7 percent), which makes the tax code more coherent while giving all South Carolinians a tax cut or no change in their liability. Those in the current 3 percent bracket will be held harmless so their taxes do not increase.
  • Eliminate special interest sales tax exemptions while preserving the ones that benefit families (such gasoline, food, electricity, water, medicine). The House Republicans targeted sales tax exemptions that have outlived their usefulness or outlived their original purpose. The original list of eliminated exemptions was much longer, but many groups proved their exemptions were not arbitrary. This bill is in direct response to the South Carolina Democratic Party chairman’s lawsuit that would result in all of the sale tax exemptions being eliminated, resulting in a $3 Billion tax increase.

From the first meeting of the study committee, we stated that major, systemic reforms don’t happen overnight, and the Caucus will continue to study and refine these proposals and re-introduce them next year.

The three bills now head to the Senate, and early media reports were skeptical of passage. I’m proud of the proposals the committee made, and I’m looking forward to continuing the fight until we get these common sense reforms signed into law. I hope conservatives throughout our state will make their voices heard for tax cuts.