In Columbia, South Carolina, a notable initiative to reduce income taxes gained significant traction on Tuesday. The state’s Republican governor, alongside leading figures from the House and Senate, pledged to pass a comprehensive bill aimed at implementing a uniform tax rate across all income brackets.
The details of this proposed legislation were not disclosed during the press conference, but the overarching objective was clear: lower the current upper income tax rate from 6.2% to 3.99% by the close of 2026. Should the state’s economy continue its upward trajectory and expand the tax base, the plan predicts an additional $200 million could be trimmed from income tax collections, potentially reducing the rate even further to 2.49%.
Republican leaders assured that, unlike other states, South Carolina would not raise taxes on sales or property to balance the reduction in income tax. This is in contrast to nearby states like Mississippi and Louisiana, which are considering adjusting sales or gas taxes to counterbalance their revenue drop. Other states, including Kentucky, have also introduced measures to lower income taxes, with Kentucky’s rate already down from 4% to 3.5%.
At the Statehouse announcement, step-by-step plans to achieve this tax reduction were not detailed, other than a commitment that all taxpayers would contribute something. Currently, there are affluent residents in South Carolina who earn over a million dollars annually without contributing state income tax, as highlighted by Bruce Bannister, the Republican House Ways and Means Chairman.
“By eliminating the avenues that enable the manipulation of the tax system, there will be individuals who might face higher taxes,” Bannister indicated. “Nevertheless, we believe a flat rate of 3.99% represents a fair and competitive tax,” he added.
Statistics from an analysis conducted five years ago, when the income tax was initially cut, showed that roughly one-third of South Carolinians who submitted tax returns did not owe any state income tax, primarily due to their low-income status.
Governor Henry McMaster emphasized the importance of everyone contributing, even those with the lowest incomes, beyond sales or property taxes. “I am looking forward to an equitable taxation framework in South Carolina—low, broad, fair, and flat—ensuring that everyone contributes a small amount towards being stakeholders in our state,” McMaster articulated.
Thanks to a robust economic climate and a significant population increase of 1.5 million since 2000, South Carolina finds itself financially equipped to move forward with this tax reduction. Many new residents are prosperous retirees, adding to the state’s economic vigor.
The ambition is to establish one of the Southeast region’s most competitive income tax rates. Achieving a 2.49% rate would be unprecedented, positioning South Carolina below neighboring states such as Georgia, North Carolina, Virginia, and Alabama in terms of income tax rates, according to Bannister.
With less than two months remaining in the 2025 legislative session, lawmakers are confident in their ability to pass the tax cut plan through both legislative chambers and onto the governor’s desk. Although no Democrats were present at Tuesday’s gathering, historically, they have supported other tax reductions, including the ongoing initiative to lower the top rate from 7% to 6%, which is anticipated to achieve its target next year.