By PSA Newsroom Staff
COLUMBIA, S.C. — A sweeping tax overhaul moving through the South Carolina Legislature could eventually eliminate the state income tax, but the proposal is already raising questions about who benefits — and who may pay more.
The bill would restructure South Carolina’s income tax beginning in 2026, shifting how taxes are calculated and setting up a long-term pathway to lower rates. Supporters say it modernizes the tax code and puts more money back in residents’ pockets.
“We’re interested in putting money back in taxpayers’ pockets,” said Sen. Ross Turner (R-Greenville) during committee debate.
Under the plan, South Carolina would move away from using federal taxable income and instead base state taxes on adjusted gross income (AGI). Federal deductions would be replaced with a new state deduction aimed at helping lower-income filers. A built-in “trigger” would automatically lower tax rates in years when revenue growth reaches at least 5%, potentially driving the income tax down to zero over time.
But projections show the impact would be mixed. About four in ten filers would see a tax cut, while more than a quarter could pay more — particularly some middle-income households who currently benefit from federal deductions.
Gov. Henry McMaster has voiced support for reducing the income tax, calling it a step toward making South Carolina more competitive and affordable.
Critics warn the plan could create funding gaps for schools, roads and public safety if economic growth doesn’t keep pace. Others argue the benefits tilt toward higher earners unless additional safeguards are added.
The bill now heads to the Senate Finance Committee, where lawmakers are expected to take a closer look at its long-term fiscal impact.
For more information:
https://legiscan.com/SC/bill/H4216/2025
The official RFA analysis of H.4216:
