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TO AMEND SECTION 12-6-510, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE INDIVIDUAL INCOME TAX, SO AS TO REDUCE THE TOP MARGINAL RATE TO SIX PERCENT AND TO SPECIFY THE MANNER IN WHICH THE REDUCTION OCCURS; TO AMEND SECTION 12-6-1171, RELATING TO THE MILITARY RETIREMENT INCOME DEDUCTION, SO AS TO ALLOW FOR THE DEDUCTION OF ALL MILITARY RETIREMENT INCOME; AND TO REPEAL SECTION 12-6-515 RELATING TO AN ARCHAIC INDIVIDUAL INCOME TAX PROVISION.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-6-510 of the 1976 Code is amended to read:
"Section 12-6-510. (A) Subject to the provisions of subsection (B), for taxable years beginning after 1994, a tax is imposed on the South Carolina taxable income of individuals, estates, and trusts and any other entity except those taxed or exempted from taxation under Sections 12-6-530 through 12-6-550 computed at the following rates with the income brackets indexed in accordance with Section 12-6-520:
Not over $2,220 2.5 percent of taxable income
Over $2,220 but not over $4,440 $56 plus 3 percent of the excess over $2,220;
Over $4,440 but not over $6,660 $123 plus 4 percent of the excess over $4,440;
Over $6,660 but not over $8,880 $212 plus 5 percent of the excess of $6,660;
Over $8,880 but not over $11,100 $323 plus 6 percent of the excess over $8,880;
Over $11,100 $456 plus 7 percent of the excess over $11,100.
(B)(1) Notwithstanding subsection (A), for taxable years beginning after 2021, a tax is imposed on the South Carolina taxable income of individuals, estates, and trusts and any other entity except those taxed or exempted from taxation under Sections 12-6-530 through 12-6-550 computed at the following rates with the income brackets indexed in accordance with Section 12-6-520:
At Least But less than Compute the tax as follows
$0 $3,200 0% times the amount
$3,200 $6,410 3% times the amount minus $96
$6,410 $9,620 4% times the amount minus $160
$9,620 $12,820 5% times the amount minus $256
$12,820 or more 6% times the amount minus $385
(2) Notwithstanding the provisions of item (1), the reduction in the top marginal rate contained in this item, as compared to the same in subsection (A), must be phased-in as provided in item (3). Until the top marginal rate is fully phased-in, the bracket to which this reduced top marginal rate applies must be the same as the bracket for the top marginal rate provided in subsection (A). All reductions are permanent and cumulative. During the phase-in and after, the department shall continue to adjust the brackets as provided in Section 12-6-520.
(3) For Tax Year 2022, the top marginal rate shall equal 6.8%. Beginning with Tax Year 2023, and each year thereafter until the top marginal rate equals 6%, the top marginal rate must decrease by two-tenths of one percent if general fund revenues are projected to increase by at least five percent in the fiscal year that begins during the tax year. For purposes of this subsection, beginning with the initial forecast required pursuant to Section 11-9-1130, the general fund revenues projection must be determined by the Revenue and Fiscal Affairs Office by comparing the current fiscal year's recurring general fund expenditure base with the Board of Economic Advisors' most recent projection of recurring general fund revenue for the upcoming fiscal year. Upon the issuance of the initial forecast, the Executive Director of the Revenue and Fiscal Affairs Office, or his designee, shall notify the Department of Revenue of the projected percentage adjustment. The executive director, or his designee, shall provide similar notice if subsequent modifications to the forecast change the projected percentage adjustment. However, the forecast in effect on February fifteenth of the current fiscal year is the final forecast for which the percentage adjustment is determined, and no subsequent forecast modifications may have any effect on that determination. For purposes of this section, 'recurring general fund revenue' and 'recurring general fund expenditure base' have the same meaning as provided in Section 6-27-30.
(C) The department may prescribe tax tables consistent with the rates set pursuant to
subsection (A) this section."
SECTION 2. A. Section 12-6-1171(A) of the 1976 Code is amended to read:
(1) An individual taxpayer who has may deduct all military retirement income , each year may deduct an amount of his South Carolina earned income from South Carolina taxable income equal to the amount of military retirement income that is included in South Carolina taxable income, not to exceed seventeen thousand five hundred dollars. In the case of married taxpayers who file a joint federal income tax return, the deduction allowed by this section shall be calculated separately as though they had not filed a joint return, so that each individual's deduction is based on the same individual's retirement income and earned income. For purposes of this item, 'South Carolina earned income' has the same meaning as provided in Section 12-6-3330.
(2) Notwithstanding item (1), beginning in the year in which an individual taxpayer reaches age sixty-five, an individual taxpayer who has military retirement income may deduct up to thirty thousand dollars of military retirement income that is included in South Carolina taxable income."
B. This SECTION takes effect upon approval by the Governor and first applies to tax years beginning after 2021.
SECTION 3. A. Section 12-6-515 of the 1976 Code is repealed.
B. This SECTION takes effect on January first of the first tax year in which the provisions of Section 12-6-510(B) are fully phased-in and the top marginal rate equals six percent.
SECTION 4. This act takes effect upon approval by the Governor.
This web page was last updated on January 27, 2022 at 11:50 AM