South Carolina Senate wants accelerated income tax cut while House looks at property tax rebate

COLUMBIA, S.C. (AP) — The South Carolina Senate started debating a budget Tuesday that accelerates a planned income tax cut instead of the House plan to use $500 million to give homeowners a one-time property tax rebate.

Once the spending plan passes the Senate, a group of three House members and three senators — likely including the leaders of each chamber’s budget committee — is going to have to sort out the differences over the next month or so with the tax break and other items in South Carolina’s $15.4 billion spending plan for next budget year.

Republican Senate Finance Committee Chairman Harvey Peeler has called the competing tax breaks a wonderful problem to have in the 2024-25 fiscal year budget, which again left lawmakers with a substantial pot of additional money to spend.

But Peeler has left little doubt he thinks spending $100 million to knock the income tax rate most people pay in the state from 6.3% to 6.2% is the right move, saying it lasts forever compared to a one-year drop in property tax. The state is in the middle of a five-year effort to cut its top income tax rate from 7% to 6%.

The money involved comes from an account meant to provide property tax relief. Sales tax goes into the fund, and a boom in spending during and after the COVID-19 pandemic has left the account flush with cash.

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The House budget suggested giving the money back as a property tax rebate. But county officials worry property tax bills will snap back next year and homeowners will be angry at them.

Along with $100 million in income tax cuts, the Senate plan spends the $500 million on roads and bridges, local water and sewer system repairs, and other items.

Another item the budget conference committee will have to resolve is how much of a raise state employees get. The Senate plan would give state employees making less than $50,000 a raise of $1,375 a year. Workers making more than that would get a 2.75% boost in pay. The House plan gives a $1,000 raise to workers making less than $66,667 and a 1.5% raise to those who make more.

Last year, there was a monthlong showdown over the differences in the budget about how much money should be given to start work on a new veterinary school at Clemson University. It led to a tense meeting and accusations of who cared about people and education more before a compromise was reached in early June.

One point both chambers agreed on is raising teacher pay. Both spending plans set aside about $200 million. Every teacher would get a raise and the minimum salary for a starting teacher would be increased to $47,000 a year. The budget also would allow teachers to get a yearly raise for each of their first 28 years instead of their first 23.

Other items in the Senate plan include $36 million to the Department of Juvenile Justice for security and prison improvements, as well as $11 million to put technology to find unauthorized cellphones in maximum security prisons and have providers block those numbers likely being used by inmates.

There is $175 million to finish work on the new school for veterinary medicine at Clemson University and $100 million for a new medical school at the University of South Carolina.

Senators set aside nearly $5 million for a forensic audit and other help to determine where $1.8 billion in a state Treasurer’s Office account came from and where it was supposed to go.

There is $11.5 million to protect the integrity of the 2024 election and $12.5 million to upgrade election systems.

The Senate budget is “balanced not only in arithmetic; it’s balanced on the needs of the state of South Carolina,” Peeler said. “First tax relief, second public education and third infrastructure.”