South Carolina: Governor Haley proposes the biggest tax cut in state history
The proposal contains three major components:
- Cut the state income tax rate from seven percent to five percent over the next decade, nearly a 30 percent reduction in state income taxes;
- Eliminate the legislatively elected transportation commission to “stop wasting our money;” and
- Increase the gas tax by 10 cents over the next three years and dedicate that money entirely toward improving roads.
Income tax reduction
The governor proposes automatic income tax cuts of about $170 million per year to get to her ultimate goal of a five percent income tax. This would be paid for from the general fund, which has grown by almost $1.3 billion since 2009 or about $256 million each year. “What that means is that, if things continue as they have recently the tax cut will be paid for in its entirety—with money to spare.”
Gov. Haley adds that even if the state sees a repeat of economic disaster, “more than half our income tax cut will be paid for simply by not spending more money. And beyond that, we can all agree that our state government can use a little trimming if it means South Carolinians can keep more of their hard earned dollars.”
Gas tax reduction
Gov. Haley’s income tax reduction is a “swap” for an increase in the gas tax, so the two are a package deal. According to a 2014 Tax Foundation report, South Carolina’s current gas tax is only 16.75 cents per gallon, the third lowest in the country behind Alaska (12.4 cents per gallon) and New Jersey (14.5 cents per gallon). Gov. Haley points out that her state’s rate is quite a bit below neighboring states’ rates; the Tax Foundation reports that Georgia’s rate is 27.49 cents per gallon while North Carolina’s is 37.75 cents per gallon.
Gov. Haley’s gas tax allows South Carolina to remain competitive with adjacent states. In addition, the increase amounts to the “largest single investment in South Carolina’s roads and bridges in state history.” Her proposal refers to current estimates suggesting that South Carolina needs $1.3 billion over 10 years to merely stop the decline. The governor contends that her plan “funds that and much, much more, investing an additional $2.2 billion over the next decade for improvements above and beyond what we need to maintain our current condition.”
The end result
Ultimately, Gov. Haley’s proposal means that on average, “South Carolinians will see $689 every year in lower taxes. That’s a semester of books for a college student. Or two years of Internet service at home for a South Carolina family. Or a year of school lunches at a South Carolina public school. It’s real money.”