South Carolina income tax bill advances to next step

COLUMBIA, S.C. — A bill that would overhaul South Carolina’s income tax system is headed to the House floor after clearing the Ways and Means Committee in a 17-6 vote.

The measure maintains a tiered tax structure but aims to ultimately eliminate the state income tax entirely. Lawmakers made changes after earlier pushback on a proposed flat tax plan.

Under the current proposal, the first $30,000 of taxable income would be taxed at 1.99%, while income above that threshold would be taxed at 5.39%.

“This amendment will put us on a path to getting rid of the state income tax,” said Rep. Brandon Newton, R-Lancaster. “Unlike the original plan, which stopped at a certain point of 2.49%, this plan will continue to use the triggers all the way down to zero.”

The bill sets up a system where, for every year the state sees at least 5% growth in income tax revenue, tax rates would be cut by $200 million. That process would continue until the income tax is eliminated entirely.

“It will lower all the way down to 1.99%, which will effectively create a flat tax once you get to that point,” Newton said. “And then we will continue the same exact steps all the way down to getting to zero.”

In the first year, around 75% of South Carolina taxpayers would see either no change or a tax cut. About 24% of filers would see an increase—but it’s unclear who exactly that would affect.

Rep. Todd Rutherford, D-Richland, voted against the bill,  says he’s hestiant to support a tax plan until there is more information about who would be impacted by that tax increase. 

“Across every taxpayer band, somebody is going to get a tax increase,” Rutherford said. “Until I am comfortable with who those people are and why they’re getting it, I can’t support this bill.”

Rutherford also raised concerns about replacing the revenue, noting that income taxes make up about half of the state’s budget.

“If we’re not going to supplant that income using money from, say, medical marijuana, casinos or sports betting, then we shouldn’t be doing it,” he said. “It would be a lot easier, a lot more palatable, if we were taking that money from new taxes generated from new programs, rather than trying to give the appearance of a cut when in actuality it’s a tax increase.”

While the bill is moving forward, lawmakers say it wouldn’t take effect this year, even if passed this session. However, a separate cut to the state’s top income tax rate—FROM 6.2% to 6%—was included in this year’s state budget and would take effect in July, once the budget is approved.