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Saturday, October 23, 2010

Coming Soon in Your Tax Bill: Taxes on Groceries, Prescription Drugs, Water, etc...

"The Tax and Realignment Commission (TRAC) has approved the personal state income tax to reduce tax breaks for some South Carolinians.
South Carolina’s deduction and personal exemption amounts are between two and three times higher than Georgia and North Carolina.
The commission said more than 40 percent of the state’s residents doesn’t pay taxes and it’s becoming a problem South Carolina just can’t afford. They said this number continues to grow five times as fast as the overall rate of filers, meaning those who do have to pay taxes must make up for everyone else.
TRAC suggests broadening the number of taxpayers so everyone would have to pay a smaller amount, but that means taking a hard look at tax breaks that are in place. One suggestion in the draft was to have everyone pay a smaller fee depending on his or her income.
All income tax filers who are residents of South Carolina have either a minimum level of Adjusted Gross Income or are required to file a federal return. Filers would pay a fee that would still remain low but would broaden the pool of taxpayers.
Those who make under $4,999 adjusted gross income would remain tax-free but if you made between $5,000 and $49,999 you would be asked to pay a $25 flat rate. Those making between $50,000 and $99,999 would pay $50 and more than $100,000 would pay $75.
The committee also suggests eliminating a tax break on workers’ compensation. When you get hurt and miss work, the state doesn’t tax that income, which “piggybacks” the federal law when it comes to what is and isn’t taxable.
Another suggestion is to reduce tax breaks for senior citizens. TRAC said that the tax exemption for a couple 65 or older with no dependents is about $75,000 compared with a couple younger than 65 with two children at about $26,000.
That’s almost three times larger and is one of the highest exemption rates in the country. The state offers the exemption regardless of the source of income.
The commission also pointed out that South Carolina adjusts its state income tax rate yearly with the federal rate. They say the number of exemptions is growing and the state should cap personal deductions and exemptions at their Tax Year 2009 levels.
A final suggestion was to reduce tax breaks on capital gains. South Carolina is one of the most generous states in this regard where only five out of 50 states give larger capital gains tax breaks.
But the commission says it doesn’t have any intention of eliminating the tax breaks altogether just to lower the exclusion amount of 44 percent. This will allow South Carolina to remain competitive especially with neighboring states and increase the incentive for investment in the state." Read full article
 Related Information: 
The Palmetto Insider Contains listing of TRAC members and who appointed them to the commission. Also gives reader insight into the questionable tactics TRAC is employing to ultimately raise taxes. Among them is the recommendation to tax groceries, prescription drugs, water.....
South Carolina Association of CPA's



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