South Carolina Lawmakers Advance Income Tax Overhaul with Goal of Elimination
COLUMBIA, S.C. — A new bill aimed at overhauling South Carolina’s income tax system has gained traction, passing the Ways and Means Committee with a 17-6 vote and now headed to the House floor. This legislation retains a tiered tax structure while setting its sights on eventually abolishing the state income tax altogether.
The revised proposal proposes a modest tax rate of 1.99% for the first $30,000 of taxable income, while earnings above that would be taxed at 5.39%. Representative Brandon Newton, R-Lancaster, emphasized that this plan differs from a previously suggested flat tax rate, stating it would progressively reduce rates over time, using growth in income tax revenue as a trigger.
The plan stipulates that any year the state experiences at least 5% growth in income tax revenue, tax rates would be decreased by $200 million, leading toward the elimination of the income tax. Approximately 75% of South Carolina taxpayers are projected to see no change or gain a tax cut in the initial year, although around 24% might face an increase.
Critics, like Representative Todd Rutherford, D-Richland, raised concerns about the potential impacts on various taxpayer groups and the need for adequate revenue replacement, given that income taxes contribute to about half of the state’s budget. Rutherford voiced skepticism about supporting the bill without clarity on its long-term implications.
Although the proposed overhaul is gaining momentum, any changes would not take immediate effect this year. However, a separate budget measure is set to decrease the top state income tax rate from 6.2% to 6%, scheduled to commence in July following the budget’s approval.
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