Next week, South Carolina Senators will meet to discuss a new state budget that includes a proposal to accelerate the reduction in the state’s top income tax rate. The plan, approved by the Senate’s Finance Committee, aims to cut the current top personal income tax rate from 6.4% to 6.2% for tax year 2024. This move would double the size of the tax cut initially planned, taking it to 6.2% instead of 6.3% as scheduled.
Governor Henry McMaster has expressed his support for speeding up the income tax cuts, stating that taxpayers should keep more of their money if revenues allow for it. Proponents of the accelerated rate reduction argue that it is crucial in the current environment of heightened state tax competition. South Carolina is surrounded by states that have already reduced and flattened income tax rates, such as North Carolina and Georgia, making it necessary for South Carolina to remain competitive.
Recently, $1.8 billion of unclaimed state funds were discovered in a flow-through state bank account, sparking discussions about returning the money to taxpayers. Legislation has been filed to move the funds into a special fund to provide one-time tax rebates for individuals who filed tax returns for 2023. The bill has gained the support of 20 legislative sponsors and presents a historic opportunity for taxpayer relief.
In addition to the proposed tax cuts, South Carolina lawmakers have been focusing on other reforms in recent years. In 2023, they created an education scholarship account program to provide school choice for thousands of families in the state. They also repealed Certificate of Need mandates, which have been criticized for inflating healthcare costs. By enacting these reforms and potentially accelerating income tax relief, South Carolina is positioning itself as a more reform-oriented red state.
If the new state budget is passed with the accelerated income tax cuts, it will further demonstrate South Carolina’s commitment to reform and a free market approach. Lawmakers in the state are shifting from traditional ways of governance to exploring ways to reduce government intervention and allow the market to flourish. This shift is indicative of a new era in South Carolina where legislators are focused on lifting all boats and fostering economic growth through conservative policies.
