COLUMBIA, SC (WSPA) – A House Ways and Means subcommittee is considering a bill that would cut state income taxes in South Carolina.

The bill would reduce the individual income tax marginal 7% rate by 0.2% per year for five years to 6% beginning in tax year 2022.

Last week, state budget writers heard from the South Carolina Revenue and Fiscal Affairs office. Executive Director Frank Rainwater talked about South Carolina’s tax rate.

He confirmed South Carolina’s 7% top tax rate is higher than Georgia’s and North Carolina’s but the effective tax rate – taxes actually paid – is lower than the two neighboring states.

“A lot of people describe it as an optics problem,” Rainwater said. “I see those reports on the websites where they say, ‘Don’t move South Carolina because it’s 7%.’ That’s not telling you the whole story. When you look at the overall burden relative to other states, our overall burden is low.”

Rainwater said about 44% of South Carolinians don’t pay any state income tax due to deductions and exemptions.

Under the bill, the reduction in the rate in years two through five of the phase-down only occurs if growth in projected General Fund revenue exceeds 5% of the expenditure base.

His office also estimates once the top tax rate hits 6%, South Carolina would lose out on about $800,000,000. Rainwater said they didn’t have an estimate on how much the average tax payer would save.

“In the big picture, that’s the algebra problem we have. As you effect the definition of income or the tax rate – you’re affecting different tax payers differently,” he said.

H.4880 is currently in the House Ways and Means Committee.

The bill would also allow taxpayers to claim a full deduction of military retirement income.