New estimates show South Carolina is expected to have a $4.628 billion surplus between this and next fiscal year, according to the South Carolina Board of Economic Advisors (BEA).
The increased estimate for this fiscal year included $921 million more in taxes and fees that will be collected by the state, going from $10.9 billion to $11.8 billion.
“This change reflects consistently higher than expected revenue collections this year, including exceptionally high growth in multiple revenue categories,” according to the BEA report. “As a result of unusually strong revenue growth through January of 20.1 percent, revenues for [fiscal year 2022] are now expected to increase 6.6 percent over the record high collections in [fiscal year 2021].”
The estimates for next fiscal year increased by $621.5 million from $10.9 billion to $11.5 billion collected, which would be 2.4% less than the estimate for this fiscal year.
The BEA report said stimulus spending from consumers is expected to subside next fiscal year, impacting the large growth in sales and corporate taxes over the past fiscal year.
The updated BEA estimates were cited as Gov. Henry McMaster and state House leaders announced a proposal Tuesday to lower state income taxes with what they said would ultimately be a $1 billion cut.
The tax cut would trim the current 4%, 5% and 6% rates for income between $3,200 and $16,040 to 3% and would lower the rate for any income above that from 7% to 6.5%. The plan is for the top rate to drop to 6% within five years.
The cut would drop the state’s effective income tax rate from 3.1% to 2.34%
“South Carolina has the 10th lowest effective tax rate in the nation and we are going to take that a step further,” South Carolina House Ways and Means Committee Chair Murrell Smith said.
The BEA financial estimation for next year was kept conservative, the BEA report noted, predicting sustained higher wages but also waning consumer spending. It said the most difficult part of the estimation is “determining the timing and magnitude of the expected slowdown in revenue growth as the effects of federal stimulus programs subside.”
