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COMMITTEE REPORT
March 4, 2004
H. 4765
Introduced by Reps. Wilkins, W.D. Smith, Harrell, Cato, Chellis, Harrison, Quinn, Townsend, Witherspoon, Leach, Viers, Koon, Altman, Anthony, Bailey, Bales, Barfield, Battle, Bingham, J. Brown, Ceips, Clark, Clemmons, Clyburn, Coates, Dantzler, Davenport, Delleney, Duncan, Edge, Emory, Frye, Gilham, Hagood, Hamilton, Harvin, Haskins, Hayes, Herbkersman, Hinson, Huggins, Keegan, Kirsh, Lee, Limehouse, Littlejohn, Loftis, Lucas, Mahaffey, Martin, McCraw, McGee, Merrill, J.M. Neal, Neilson, Owens, Parks, Perry, Pinson, E.H. Pitts, M.A. Pitts, Rhoad, Rice, Richardson, Sandifer, Scarborough, Simrill, Sinclair, Skelton, D.C. Smith, F.N. Smith, G.M. Smith, G.R. Smith, J.R. Smith, Stewart, Stille, Talley, Taylor, Toole, Tripp, Trotter, Umphlett, Vaughn, Walker, White, Whitmire and Young
S. Printed 3/4/04--H.
Read the first time February 17, 2004.
To whom was referred a Bill (H. 4765) to amend the Code of Laws of South Carolina, 1976, by adding Section 12-6-515 so as to reduce the seven percent top marginal rate of South Carolina, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, by striking Section 12-6-515 as contained in SECTION 1 and inserting:
/ Section 12-6-515. (A) Notwithstanding the rates of taxes imposed pursuant to Section 12-6-510, beginning with taxes due for the 2005 taxable year and continuing each taxable year thereafter, the then applicable top marginal rate of income tax imposed by that section is reduced by .225 until the top marginal rate of income tax attains a permanent rate of 4.75 percent. The department shall make the necessary adjustments to the rates and the brackets otherwise applicable pursuant to Section 12-6-510.
(B) Notwithstanding the scheduled reductions in the top marginal income tax rate provided in subsection (A) of this section, beginning with the top marginal rate applicable for taxable year 2006, the reduction otherwise scheduled must not be made for that taxable year if estimated general fund revenue growth as established in the February fifteenth revenue forecast of the Board of Economic Advisors is less than two percent of the most recent estimate by the board of general fund revenues for the current fiscal year. No reduction in the top marginal rate made pursuant to this section may exceed .225 for any one taxable year. /
Renumber sections to conform.
Amend title to conform.
Majority favorable. Minority unfavorable.
ROBERT W. HARRELL, JR. GILDA COBB-HUNTER
For Majority. KENNETH KENNEDY
For Minority.
REVENUE IMPACT1/
This bill is expected to reduce general fund individual income tax revenue by an estimated $6,000,000 in FY2004-05, $50,000,000 in FY2005-06, $130,000,000 in FY2006-07, $204,000,000 in FY2007-08 and by increasing amounts in succeeding years up to an estimated $959,000,000 in FY2014-15 when the top marginal rate of 4.75 percent is expected to be reached.
Explanation
This bill would reduce the current 7 percent top marginal rate by .225 percent per year beginning July 1, 2005 until the top marginal rate reaches 4.75 percent, which is expected to occur by Tax Year 2014. Based on personal income tax growth projections during the reduction period, individual income tax revenue is expected grow an average of 5 percent per year through 2014. As such, reducing the top marginal individual income tax rate by .225 percent per year beginning July 1, 2005 would reduce general fund individual income tax revenue by an estimated $50,000,000 in FY2005-06, $130,000,000 in FY2006-07, $204,000,000 in FY2007-08 and by increasing amounts in succeeding years up to an estimated $959,000,000 in FY2014-15 when the top marginal rate of 4.75 percent is expected to be reached. Because employees are not required to disclose their motivations when adjusting their withholdings, Section 2 of this bill is not expected to preclude adjustments to withholdings beginning in January 2005 by taxpayers who choose to take advantage of the rate reduction as soon as possible. As such, employees accounting for an estimated 10 percent of income would be expected to reduce their withholdings between January 1, 2005 and June 30, 2005 in anticipation of the first rate cut scheduled for July 1, 2005. These adjustments are expected to reduce individual income tax revenue by an estimated $6,000,000 in FY2004-05.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 12-6-515 SO AS TO REDUCE THE SEVEN PERCENT TOP MARGINAL RATE OF SOUTH CAROLINA INDIVIDUAL INCOME TAX IN EQUAL ANNUAL INCREMENTS OF .225 PERCENT UNTIL A PERMANENT TOP MARGINAL RATE EQUAL TO 4.75 PERCENT IS ACHIEVED AND TO PROVIDE THAT A SCHEDULED REDUCTION IS POSTPONED IF GENERAL FUND REVENUE GROWTH FOR THE APPLICABLE FISCAL YEAR IS LESS THAN TWO PERCENT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Article 5, Chapter 6, Title 12 of the 1976 Code is amended by adding:
"Section 12-6-515. (A) Notwithstanding the rates of taxes imposed pursuant to Section 12-6-510, beginning with taxes due for the 2005 taxable year and continuing each taxable year thereafter, the then applicable top marginal rate of income tax imposed by that section is reduced by .225 percent until the top marginal rate of income tax attains a permanent rate of 4.75 percent.
(B) Notwithstanding the scheduled reductions in the top marginal income tax rate provided in subsection (A) of this section, beginning with the top marginal rate applicable for taxable year 2006, the reduction otherwise scheduled is postponed to the succeeding taxable year if estimated general fund revenue growth as established in the February fifteenth revenue forecast of the Board of Economic Advisors is less than two percent of the most recent estimate by the board of general fund revenues for the current fiscal year."
SECTION 2. This act takes effect July 1, 2005. Adjustments to withholding or estimated tax payments to reflect the lower 2005 taxable year marginal income tax rate may not be made before that date.
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