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Gov. McMaster proposes $430M tax relief in his SC state budget. Will taxpayers see a dime?

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McMaster

Gov. Henry McMaster releases his budget proposal outside his office in the Statehouse on Monday, Jan. 13, 2020. It includes $430 million in proposed tax relief. Seanna Adcox/Staff 

COLUMBIA — South Carolina taxpayers would get nearly $430 million in tax relief, including another rebate, if lawmakers approve Gov. Henry McMaster's budget proposal released Monday.

The Republican governor wants taxpayers to benefit directly from some of the $1.8 billion in additional revenue the state can spend starting July 1. But leading members of the General Assembly have said they expect the entire windfall from a growing economy to be spent on long-needed projects.

McMaster has some spending plans for the more than $10 billion state budget, as well.

Those include $100 million on upgrading South Carolina's prisons to make them safe for officers and inmates.

The state must make a dramatic investment "before it's too late. We don't want another reoccurrence of Lee," he said, referring to the April 2018 riot at Lee Correctional that left seven inmates dead and 22 injured in the deadliest prison riot in a generation

McMaster's executive budget also formalizes his calls to give every K-12 public school teacher a $3,000 pay raise, costing $213 million, and expand state-paid full-day 4-year-old kindergarten to every district, at a cost of $53 million.    

McMaster focused Monday on the need to return money to taxpayers, saying they should be able "to spend it, invest it, save it, whatever they want to do. That’s a way of priming this pump to keep the economy going."

His latest proposal, however, largely repeats ideas legislators have previously ignored.

Still, McMaster has had more success than his predecessors with legislators adopting his recommendations in some form, even if the amounts are smaller. That's because he's consulted legislators ahead of releasing his budget plans and not berated them publicly, as former Govs. Mark Sanford and Nikki Haley did frequently. 

Legislators leaders, for example, have already backed McMaster's calls for teacher pay raises and expanding full-day 4-year-old kindergarten. 

Tax relief

The governor's tax cut plan includes returning $250 million as one-time rebates.

The actual amount would depend on what each household pays in income taxes, from a $50 minimum returned to roughly 410,000 taxpayers to a high of $265,000 going to a single household. The average household rebate would be $204, according to the governor's office.

Last year, in response to McMaster's call for $200 million in rebates, the Legislature approved $67 million that sent taxpaying households a $50 check. Much of that money came from state taxes paid on a winning $1.5 billion Mega Millions lottery jackpot ticket sold in the Upstate.

McMaster again called for cutting income tax rates, which would reduce revenue into state coffers by $161 million in the fiscal year that starts July 1, the Governor's Office said. Once fully phased in by 2025, his plan would reduce revenue by $860 million annually.     

The governor also proposed, again, fully exempting from state income taxes the pension benefits of military veterans and first responders, reducing state revenue by an estimated $18.5 million and benefiting roughly 60,000 residents. State law already partially exempts their retirement benefits.

Senate Majority Leader Shane Massey said last week this should be the year legislators finally tackle a broad overhaul of the state’s tax code, to include cutting property tax rates.  

“I don’t want to do some gimmicky $50 rebate just so you can make a campaign commercial about it,” said the Edgefield Republican. “I want to make some significant changes.”

But he’s not at all optimistic that will happen.

“Oh, we’re going to spend all of the money. We just will,” Massey said.

State Chamber of Commerce President Ted Pitts, a former legislator, issued a warning for the legislative session that starts Tuesday. 

"As far as tax reform goes, if you're a legislator and thinking you're going to get out of Columbia spending the $1.8 billion, the extra money that you have in the budget, I think you're confused," he told reporters Monday. "This is an election year."

All 170 seats in the House and Senate are up for election in 2020.

K-12 education

Some veteran teachers have criticized McMaster's push for an across-the-board $3,000 pay boost, as it represents a smaller percentage of their paycheck. 

But McMaster said his plan is meant to disproportionately help new teachers, as a way to attract people into the profession and retain those most likely to leave it.  

"We know teachers are leaving the classrooms at an alarming rate. We must reverse this trend," he said.

McMaster's budget also spends $23 million toward his campaign pledge to have a full-time law enforcement officer in every school. And it spends an additional $1 million on mental health counselors. 

Each teacher would also get an additional $125, for $400 total, to spend on classroom supplies. Teachers complain they often must pay out of pocket for basic materials.

Colleges 

McMaster proposes spending $162 million to repair aging buildings at South Carolina's public universities and colleges. The money would be distributed based on enrollment, ranging from $471,000 to Denmark Tech to $21.3 million to the University of South Carolina's main campus in Columbia.

"We should pay down this deferred maintenance while we can rather than borrowing money," he said, referring to legislators' previous proposals for tackling the backlog.   

He proposes sending colleges $26 million to freeze tuition at public colleges for in-state students for the second consecutive year. And he wants to increase state aid for need-based scholarships for poor students by $32 million, bringing the total to $54 million.

An additional $3 million would cover tuition costs for South Carolina's Army and Air National Guard members. 

McMaster’s budget serves as recommendations to S.C. House and Senate budget-writing committees. The General Assembly has final say on spending.

Jessica Holdman contributed to this report.    

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Follow Seanna Adcox on Twitter at @seannaadcox_pc.

Assistant Columbia bureau chief

Adcox returned to The Post and Courier in October 2017 after 12 years covering the Statehouse for The Associated Press. She previously covered education for The P&C. She has also worked for The AP in Albany, N.Y., and for The Herald in Rock Hill.

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