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Senate finance committee reports income‑tax rewrite favorably; shifts from federal taxable income to AGI and adds automatic triggers
Summary
The committee favorably reported the income‑tax measure that decouples state taxation from the federal taxable income base to federal adjusted gross income (AGI), flattens to two rates and includes revenue triggers for automatic rate reductions; debate focused on distributional effects and fiscal tables.
The Senate Finance Committee gave a favorable report to the income‑tax overhaul considered as 42 16 after a substantive presentation and extended questioning about fiscal effects and who would see increases or decreases under the proposal.
Senator Turner, speaking for the subcommittee, said the bill moves South Carolina from taxing off federal taxable income to taxing off federal adjusted gross income and adopts a two‑rate structure: "we get to go from taxing off the federal taxable income to the federal adjusted gross income," he told the committee. The change, staff said, is intended to put South Carolina in a better position to compare tax burdens with neighboring states and to give the General Assembly greater control over state tax policy.
Key mechanics: the bill creates a lower rate (1.99%) for incomes up to $30,000 and a higher rate (about 5.39%) above that threshold, and it includes trigger provisions that automatically reduce rates if income‑tax revenue grows by specified percentages. Staff estimated a near‑term revenue reduction tied to those changes and said earlier cuts since FY21–22 have delivered roughly $1.3 billion in individual income‑tax relief on a linear sum across budgets.
Points of contention: several senators pointed to the fiscal‑impact tables showing a mixed distribution — some cohorts would see tax cuts while others, particularly certain low‑income brackets or taxpayers with large federal deductions, could initially face small increases. One senator flagged a roughly $4.2 million aggregate increase among low‑income cohorts and said he may offer an amendment on the floor to hold harmless those earning under $30,000.
Committee action and outlook: after debate and detailed staff responses, the committee reported the bill favorably to the Senate. Supporters argued the decoupling and triggers create a framework for state tax policy controlled by South Carolina; critics asked for amendments to reduce or eliminate short‑term increases for vulnerable cohorts.
Attributions: Senator Turner presented the subcommittee's recommendation and staff (Grant and others) provided the fiscal tables and modeling that formed the basis for the committee's questions.
