A South Carolina bill would raise the top marginal income tax rate for high-income households to fund annual $400 payments to adult residents.
H. 4856, introduced January 25 by Rep. Jermaine L. Johnson Sr. (D) and Rep. JA Moore (D), would increase the state's 7 percent top marginal income tax rate by 1 percentage point for household income between $100,000 and $165,000, and by 2 percentage points for income exceeding $165,000. Revenue from the rate increase would finance a guaranteed income program for residents over 17 years old.
Under the proposal, the revenue would be allocated to the Palmetto Dividend Fund, which the bill would establish and which would exist separately from the state general fund. The South Carolina Treasurer’s Office would distribute $400 payments from the fund to residents by July 1 of each year, starting in 2022.
The office would have liberty in structuring the program and sending out the checks, according to the bill. Balances remaining in the program fund at the end of the year would carry forward to the next fiscal year.
The payments are intended to help residents cope with rising costs and to give back to taxpayers who have been struggling during the COVID-19 pandemic, Moore told Tax Notes January 26. “We give tax breaks to corporations here in South Carolina and give tax incentives for wealthy South Carolinians — for me this is an opportunity to put money back in the hands of taxpayers and working people,” he said.
Moore, who is a chef by trade, cited his restaurant experience as proof that workers in the industry have been hit hard by the pandemic and would greatly benefit from the proposed annual check.
Moore said a fiscal impact statement of the bill is not yet available. According to an estimate of the proposal released by Johnson’s 2020 campaign, the program could cost approximately $1.2 billion a year.
Moore said that while he expects an uphill battle in the Republican-controlled Legislature to advance the proposal, Alaska’s Permanent Fund dividend is proof of the program’s practicality. Under the Alaska program, residents can receive an annual payout based on the fund’s performance and inflation. The amount in 2021 was $1,114, according to the Alaska Department of Revenue.
H. 4856 has been referred to the House Ways and Means Committee. If enacted, it would take effect immediately and apply to tax years after 2020.