COLUMBIA, SC
Progress has been halted on a much hyped Republican tax bill that supporters said would radically reshape and cut South Carolina’s income tax system through a flat tax.
The House Ways and Means Committee voted Thursday morning to adjourn debate on the bill after a state government analysis revealed that almost 60% of South Carolinians would end up paying more in taxes next year. Most of that burden would fall on middle income South Carolinians, who would end up paying hundreds of dollars more.
“I know we have some additional work to do,” said committee Chairman Bruce Bannister, R-Greenville. “We’re not going to introduce amendments that we don’t understand or think may be flawed; this is a very complicated bill.”
Republicans, who hold a suprermajority in the General Assembly, as well as the governor’s office have clearly signaled their intention to pass tax reform in 2025. But since the analysis on the bill was released Monday, nine representatives have withdrawn as sponsors.
“South Carolina has an extremely outdated and uncompetitive income tax system and it is our goal to make sure we are able to pass a comprehensive reform and cut our income taxes,” said Rep. Brandon Newton, R-Lancaster, who heads the subcommittee that introduced the bill.
“We don’t think it’s right to vote on the bill at this time but... We are still committed to passing income tax reform this year,” Newton said.
Gov. Henry McMaster made it clear that he views income tax reform a top legislative priority. Last week, the House Republican leadership announced with great fanfare their plan to introduce a flat tax of 3.99% that would gradually fall to 2.49%.
The bill would do away with the state’s current, tiered tax system, untether how taxable income is calculated from federal taxable income by no longer considering federal deductions, and introduce an income-based deduction for low earners.
But support for the bill appeared to collapse when a report by the state Revenue and Fiscal Affairs Office, an arm of the South Carolina state government that conducts financial and statistical analysis, found that 59.4% of South Carolinians would pay more next year once the 3.99% flat tax was introduced.
An analysis by The State Newspaper of the Revenue Office’s projections found that middle income South Carolinians will bear the brunt of that increase. The majority of residents who make between $20,001 and $150,000, representing nearly two thirds of total taxpayers, would have expected to see an increase in their tax liability under the 3.99% flat tax.
Of residents who made between $50,001 and $75,000, 89.4% would owe an average of $596 more on their 2026 tax bill. The average South Carolina household falls squarely in the middle of this bracket, with an income of $67,804, according to data from the 2020 U.S. Census.
The bill’s supporters argued that when the flat rate fell to 2.49%, it would reduce income taxes for most South Carolinians. But those decreases are contingent on meeting specific economic triggers that require the state’s tax income tax revenue to grow by at least 5% a year. If it does not, the flat tax rate will not fall.
But even if the state does reach the 2.49% flat tax rate, The State’s analysis found that doesn’t necessarily mean all taxpayers will be paying less than they did in 2025. That impact will be felt most strongly among the lower income brackets. Even if the flat tax fell to 2.49%, a majority of earners making between $20,001 to $30,000 would be paying an average of $250 more than they were in 2025.
Members of the hard-line conservative Freedom Caucus have also opposed the bill. Speaking at a subcommittee hearing earlier this week, Rep. Sarita Edgerton, R-Spartanburg, said that in her analysis the bill would impact middle class members of her community, like teachers, police officers and firefighters. “I’m going see almost an $800 increase for my family,” Edgerton said.
Edgerton also expressed the views of many in the Freedom Caucus, saying that the bill did not go far enough. South Carolina should cut spending and eliminate the income tax, Edgerton said.
“I say we get to the flat tax of zero,” Edgerton said.
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Ted Clifford is the statewide accountability reporter at The State Newspaper. Formerly the crime and courts reporter, he has covered the Murdaugh saga, state and federal court, as well as criminal justice and public safety in the Midlands and across South Carolina. He is the recipient of the 2023 award for best beat reporting by the South Carolina Press Association.