The Taxpayer Inflation Protection Act
S.312 would amend tax law to allow the state income tax brackets to be adjusted for inflation at the same rate federal income tax brackets are adjusted by the IRS. Under current law state tax brackets are only allowed to be adjusted by one half of the IRS adjustment, with a further stipulation the adjustment not exceed 4 percent a year.
This reform would help slow the hidden tax increases South Carolinians have been facing for years due to improper adjusting of tax brackets for inflation. But while this bill would help prevent some future tax increases it wouldn’t do anything to roll back decades of tax increases that have already resulted from improper inflation adjustments. If the current state tax brackets had been properly adjusted between their creation in 1959 and 2010, the top state income tax rate of 7 percent wouldn’t kick in until an individual earned over $73,600. Instead in 2010 the 7 percent rate began on all income over $13,350.
This is a positive reform, and a step in the right direction for tax policy, but full reform should include adjusting tax brackets for past as well as future inflation.