A little-known, ordinarily benign routine, may hold significant consequences for every South Carolina income tax payer - the annual decision on whether the state should conform to the federal tax code.
The Trump Administration’s newly passed Tax Cuts and Jobs Act have put states in a difficult position of how to smoothly and efficiently implement the cuts in a way that makes sense for state tax policy and allows those benefits to reach taxpayers.
Several weeks ago, Governor McMaster called for the state to conform to the federal tax plan, as did the State House of Representatives. Conformity typically occurs every year, making changes to the state tax policy to reflect the changes made at the federal level. However, with the bold reforms offered in the federal tax plan, this year is a different beast all together.
So the natural question is…to conform or not to conform?
The reality is that simple conformity, as we routinely do, will result in S.C. taxpayers paying more income taxes to the state; eliminating any benefit gained by the federal reductions. I don’t think that is what our citizens expect or deserve.
I, and many of my colleagues, believe we can do better than this. The path to conformity is also the path to state tax reform.
For years, I’ve advocated for reform to our old, outdated tax code to a new plan that provides real opportunity for middle class earners, lifts up our working poor and allows our local companies to be more competitive in our global economy.
Now is the best time to enact these changes, which is why I’ve proposed new legislation in the Senate. In the meantime, we’ve taken a first step forward to protect the taxpayers of the Palmetto State from the negative effects of conformity.
I authored an amendment to the budget to place any found monies, resulting from the federal tax plan, in the Tax Relief Reserve Fund. This will ensure these unauthorized funds, if collected, will be returned to the taxpayers. It will further prevent the new revenue to be used to establish a new baseline for future spending, a shell game that governments often use to camouflage unnecessary spending increases. I am pleased that my Senate colleagues agreed to this approach and it is time for the House to concur.
Neither blanket conformity nor non-conformity is the answer as both result in negative impacts to South Carolina income taxpayers. Rushing to a conformity decision is turning a blind eye to the adverse consequences of such.
Let’s not let this moment pass us by. Let’s do right by the taxpayers and finally pass a broad-based, pro-growth tax policy that is the best fit for all of South Carolina.
With the help of the House of Representatives and support from the Governor, we could soon see real, impactful tax reform around the corner.
Elected in 2013, Senator Sean Bennett represents portions of Dorchester, Berkeley and Charleston counties. He serves on the Finance; Banking and Insurance; Transportation; and Labor, Commerce and Industry committees.