Senate advances broad income-tax decoupling bill amid debate over refundable EITC and fiscal impacts
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Summary
On second reading, H42 16 drew extended debate about decoupling South Carolina income tax from federal AGI, proposals for a refundable earned-income tax credit, and differing fiscal-impact estimates; roll call recorded 39–5 to advance the bill.
Senators spent a substantial portion of the afternoon debating H42 16, a measure that would generally decouple South Carolina income-tax calculations from federal adjusted gross income and open the door to state-specific tax-policy design.
Senator from Dorchester outlined proposals members might consider if the Senate writes its own AGI rules, including the possibility of a refundable earned-income tax credit (EITC) at 10 percent of the federal credit. He said independent estimates of the fiscal impact varied widely: some studies suggested the state cost could be about $16 million for a narrowly targeted refundable credit, while the official RFA (Revenue and Fiscal Affairs) estimate that the Senate relied on returned a roughly $239 million number for a broader refundable EITC. "I can't sit here and ask the chairman of finance to poke a $239,000,000 hole into the budget without an overall approach," he said, and he withdrew or tabled some amendments accordingly.
Senator from Orangeburg described a narrower refundable EITC targeted at working families with children capped at $400 per family and said the Department of Revenue–based estimate for that targeted credit was approximately $16 million. Other senators asked for more studies and cautioned about tradeoffs: "There are no solutions in the world. There are only tradeoffs," one sponsor said.
After debate, roll-call voting recorded the bill received a second reading of the Senate by a vote of 39 to 5. Several offered that decoupling provides the state an ability to eliminate or avoid federal marriage-penalty features and to design credits tailored to state priorities; others urged comprehensive study before enacting large refundable credits.
Next steps: H42 16 is advanced on the calendar for additional consideration and amendment; senators signaled interest in further study of targeted EITC options and fiscal impacts.
Attributable quote from the transcript: "This amendment would institute a refundable earned income tax credit…the reality is that number came back as $239,000,000," said the senator explaining the RFA estimate.
