Columbia, SC (Greenville News) - The South Carolina Senate on Tuesday gave key approval to a House bill that will provide tax breaks for families while aligning the state's tax laws with last year's federal tax reforms.
The 37-4 vote came after months of work by lawmakers and state officials looking at how best to conform the state's tax code to changes made last year when Congress passed major tax reform.
The bill approved Tuesday allows the increased standard deduction under the federal plan while allowing South Carolina families to claim $4,010 for each dependent and another $4,010 for each dependent under the age of 6.
Had the state Legislature done nothing this year, taxpayers would've faced extra headaches at tax time in 2019, officials said.
Had lawmakers conformed to the federal tax rule changes without any deviations, that would have effectively increased taxes on individuals and businesses by about $200 million, officials said.
If the bill receives final approval in the House this week, it also will offer state tax officials, tax preparers and tax software firms the time they need to adjust for next year's filing season, lawmakers said.
House Majority Leader Gary Simrill called Tuesday's vote "good news" and predicted the House would approve the Senate's action on the bill this week.
"Tax conformity was critical for South Carolina taxpayers and tax preparers," he said. "This cuts confusions and duplication and allows South Carolinians personally and corporately to maintain the deductions they had prior to the Trump tax cuts."
The House passed its bill on the last day of the regular session in May. The Senate Finance Committee last month took up that bill and amended it, sending it to the floor Tuesday.
Sen. Tom Alexander, a Walhalla Republican who chaired a panel looking at the issue, told the Senate that the goals of the panel were to come up with a revenue-neutral plan that was "family and child friendly" and maintained a stable business environment.
Aligning changes made in federal tax law to the state's tax code is a routine act, Alexander said. South Carolina is one of the few states that does not automatically adjust its code to changes done on the federal level, so lawmakers have routinely passed conformity bills since 1985.
But Alexander said the issue took on new importance this year because the federal reforms did away with personal exemptions and boosted standard deductions, among other changes.
"We get the benefit of the Trump tax cuts and the continued benefit of South Carolina cuts," Simrill said.
No senator spoke against the bill, which had passed unanimously by the finance committee and Alexander's panel.
Sen. Sean Bennett, a Dorchester County Republican and member of the Senate Finance Committee, said the bill "comes as close as we possibly can to doing no harm" to taxpayers.
"I think we have a conformity bill today that protects the taxpayer in South Carolina in the current tax year as we deal with the ramifications of the larger federal tax policy," he said. "We're helping families in this bill that were really damaged the most by the changes."
He said doing away with the federal personal tax exemptions narrowed the tax base more than increasing the standard deductions helped.
"So we had to figure out a way to address those inequities in South Carolina so those families that counted on those exemptions were not damaged. And we did that," he said. "I think we have a better scenario than not conforming. We have a better scenario than just a simple conformity."
Senate Finance Committee Chairman Hugh Leatherman has appointed a panel to look at state tax reform, a process that Bennett said is long overdue.
"Now we have the ability," he said, "of really addressing the inequities in our tax code and fixing that so it's more efficient, more modernized and can be a benefit to not only the people of South Carolina but the businesses of South Carolina."
The state Chamber of Commerce had pushed for lawmakers to act on the issue this year, arguing for a revenue-neutral plan, meaning state taxpayers pay no more because of changes on the federal level.
“The Senate’s action today approving the tax conformity bill is a win for all of the state’s tax filers,” said Ted Pitts, South Carolina Chamber president and CEO. "Both individual filers and businesses benefit.”
Gov. Henry McMaster also has pushed for action on the issue, urging lawmakers in May to pass a bill that would be revenue-neutral.
