Close up of two race horses taking part in a race
Patrick Gleason of Americans for Tax Reform Highlights what could be the upcoming South Carolina tax break.
Our neighboring state of South Carolina has suggested a plan that replaces the current tiered state income tax (7% in the top tier) with a straightforward, flat rate income tax of 3.5%. This change would simplify the onerous tax law and give more money back to the South Carolinians. When the change goes into effect, South Carolina would undercut the current 5.25% rate.
In addition, the proposed South Carolina plan will completely remove the state’s corporate income tax. The North Carolina Senate budget introduced the phasing out of our corporate income tax. The North Carolina House budget would cut corporate tax to 1.99% over time.
North and South Carolina aren’t the only states considering tax cuts this year. In fact, lawmakers in 12 states have passed income tax cuts.
To stay competitive with our southern neighbor, North Carolina needs to cut taxes. See below from Gleason:
Should Senator Kimbrell’s proposal go into law, South Carolina would move from the highest income tax rate in the area to a lower rate than North Carolina and Georgia. Halving the state’s highest income tax rate would certainly make South Carolina a more attractive option for workers who discovered in the last year that they can work remotely rather than be in New York, Chicago, or other major cities. Having no state income tax has helped attract many people and employers to Florida and Texas, but many teleworkers may prefer to pay a 3.5% state income tax rather than zero if that means they are in one State like South Carolina can live that has four seasons.
Senator Kimbrell’s plan also eliminates state corporation tax and aims to zero state income tax for small businesses filed as transit companies under the individual income tax system. According to the IRS, more than 380,000 sole proprietorships in South Carolina report the individual income tax system, as do more than 121,000 partnerships and S-corp owners.
“Under that law, South Carolina no longer has corporation tax,” said Kimbrell of his proposal, which will also be facilitated by expanding the sales tax base. “This is being expanded to include an exemption from income tax for run-through companies – an exemption from taxation at the company level.”