Details and Impact of SC Bill 1087
On June 15, SC Bill 1087 was introduced to the state House of Representatives, passing unanimously through the House of Representatives and the Senate in the following two days. This amendment was introduced as the “Comprehensive Tax Cut of 2022” due to the large number of changes to reduce the taxation of both individuals and companies. The main changes are addressed below:
Individual Income Tax: Phased Reduction of the Top Marginal Rate to 6%
In 2022, the highest tax bracket will start at $16,040 at a rate of 6.5%. There is also a provision to further reduce the tax rate to 6% by decreasing it by .1% each year the State’s general fund revenues increase by at least 5%.
In addition to the change to the highest tax bracket, all other tax brackets are absorbed into a 3% tax bracket between $3,200 and $16,040. Anything below $3,200 will not be taxable.
Military Retirement Income: Fully Deductible
The portion relating to section 12-6-1171 deals with the taxation of military retirement income. This amendment takes effect at the beginning of 2022, removing the cap of $17,500 as well as removing any restriction on what military retirement income is deductible.
Manufacturing Property Exemption: Tax Exemption Percentage Increased
Section 12-37-220 addresses the tax exemption for manufacturing property. This amendment increases the valuation percentage for the exemption, effectively reducing the property taxes of manufacturing property.
To help local governments from losing revenue from this increased exemption, the state has appropriated up to $170 million per year to be given to the political subdivisions in the amounts that the Board of Economic Advisors deems necessary.
Taxpayer Rebate Fund: Up to $700 during 2022
For 2022, the state has created the Taxpayer Rebate Fund by appropriating one billion dollars from the Contingency Reserve Fund to provide rebates of up to $700 of tax liability for all income taxpayers that filed a tax return for the tax year 2021. Rebates will be given for tax liabilities up to $700; if the taxpayers tax liability is more than $700, then the rebate will be applied to remove $700 of the tax liability.
If there are sufficient funds after the rebates have been paid out, the Department of Revenue may raise the maximum rebate amount to deplete the fund. All rebates will be paid in 2022; at the end of the year, all remaining funds will be transferred back to the Contingency Reserve Fund, dissolving the Taxpayer Rebate Fund.
Click here to see the full amendments from the South Carolina General Assembly.