New legislation designed to simplify the Palmetto State’s personal income tax structure while lowering the tax rate is official.
Surrounded by members of the general assembly and other leaders, Gov. Henry McMaster (R) signed H.4216 into law on Wednesday. Beginning in this tax year, the measure changes the individual income tax system to a two-rate structure. Currently, there are three brackets.
“Cutting the personal income tax in South Carolina has long been a top priority, and today we are continuing to deliver,” said McMaster during the ceremony. “This is another major step forward that builds on years of hard work and keeps more money in the pockets of hardworking South Carolinians. It puts us on a clear path to continue reducing and ultimately eliminating the personal income tax.”
Under the new law, taxpayers will be subject to a 1.99% rate on taxable income up to $30,000 and a 5.21% rate on taxable income above $30,000, down from 6.0%. These changes will save South Carolina taxpayers an additional $325 million.
“South Carolina is moving forward with a lower, fairer income tax rate that ensures our citizens pay no more than is absolutely necessary,” said Rep. Bruce Bannister, one of the bill’s co-sponsors. “This historic income tax relief bill is the result of strong leadership and a commitment to the people of South Carolina.”
Rep. Bill Hixon (District 83, Aiken & Edgefield Counties) also co-sponsored the legislation.
In addition to immediate changes, the bill lays out guidelines to continue to decrease individual income tax rates. If individual income tax revenues increase by 5% in 2027, tax rates will be reduced the following fiscal year. That will continue until the top rate reaches 1.99%. One day, eliminating the individual income tax is the endgame.
This law is the latest in a series of sweeping tax reforms McMaster began in 2022. While helping individual taxpayers, this legislation is also touted as an incentive to draw new business into South Carolina.
“This reform makes us more competitive, more attractive to businesses, and better positioned for job creation across our state. I’m proud of the work we have done and excited about what this means for South Carolina’s future,” said Speaker of the House Murrell Smith, adding, “We did this in a responsible way in which we could lower taxes for many today and still provide the necessary elements of government that our citizens need in this state.”
McMaster echoed Smith, noting that South Carolina’s business is business.
“We’re thriving compared to other states and compared to our past, and we want to keep on,” he said. “We want to keep strengthening our economy. We want to keep educating our people, our young people, keeping them safe. You also want to be sure that we preserve our fields, forests, farms, rivers, and streams so we can enjoy life while we’re seeking this great prosperity.”
Under this new structure, the Office of Revenue and Fiscal Affairs said about 42.8% of the state’s taxpayers will see a reduction in their tax liability.
Additional details are at: https://dor.sc.gov/news/information-about-h-4216.
