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After the calamitous rollout of a former iteration of tax reform a month ago, “Republicans” in the South Carolina House of Representatives went back to the drawing board in the hopes of delivering on their top 2025 agenda item.
Their “Plan B?” An amended version of their initial tax proposal – H. 4216 – which would trim the Palmetto State’s punitively high top marginal income tax rate from 6.2% to 5.39% for income over $30,000. Income under this threshold would be taxed at 1.99%.
Further reductions could take the top rate to 1.99% according to the legislation’s lead sponsor, House ways and means committee chairman Bruce Bannister. As for the lower rate, it could be eliminated altogether.
The House’s original bill would have taken the top marginal rate down to 4.99% with future reductions lowering it to 2.49%. The original bill sparked a furious uproar, however, when a fiscal analysis revealed it would impose $1 billion in new taxes on middle class income earners. Nearly six out of ten South Carolinians would have seen higher tax bills under the original proposal, while only 19.4% of taxpayers – most of them upper-income earners – would have seen relief.
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The higher taxes on middle income earners were first called out by members of the S.C. Freedom Caucus, a group of conservative lawmakers who have been repeatedly attacked by the establishment wing of the “Republican” party.
According to an updated analysis of the amended legislation prepared by the S.C. Revenue and Fiscal Affairs (SCRFA) office, the new bill would provide an estimated $400 million in relief during its first full year of implementation.
“The actual revenue reduction will depend on income growth in future years and how quickly the rate is reduced,” SCRFA noted in its analysis.
Approximately 42.3% of South Carolina taxpayers would have a “lower liability” under the amended bill, per SCRFA – more than twice the number that would have seen relief in the original bill. Meanwhile, 33.2% would see no change – while 24.4% would pay more in taxes. Unlike the last plan, relief in the new version of the bill would be targeted toward the same middle income earners who were hit with a higher burden in the original proposal.
However, many of those filers would still see higher taxes.
Here is SCRFA’s full breakdown of the winners and losers under the amended legislation…
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After the S.C. House rolled out its initial proposal, senators led by Harvey Peeler – the chamber’s powerful finance committee chairman – unveiled a $290 million tax cut which mirrored an anemic proposal advanced several months ago by status quo governor Henry McMaster.
The Senate plan would trim the state’s top marginal rate from 6.2% to 6%.
Peeler has consistently boasted that no one in the legislature is going to “out-tax cut” him, which would indicate he intends to offer a more substantial tax cut than what the House has proposed. Peeler has plenty of room to work with, too, as his chamber submitted a version of the state budget that clocked in $2.78 billion below the $41.7 billion spending plan advanced by the S.C. House on March 12, 2025.
Time is running out on lawmakers to get a deal done. The S.C. General Assembly is set to adjourn this Thursday (May 8, 2025) at 5:00 p.m. EDT, making it highly unlikely both chambers would agree to a compromise ahead of this deadline.
Keep it tuned to FITSNews for the latest updates on the tax debate at the S.C. State House…
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FISCAL IMPACT…
(S.C. Revenue and Fiscal Affairs)
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OUR TAKE…
FITSNews has made it abundantly clear South Carolina’s oppressively high marginal income tax rates – the highest in the southeast – serve as a drag on income growth, capital investment, entrepreneurship and small business growth and expansion.
Both “Republican” tax plans introduced this year – the governor’s limp-wristed cut and the House’s ill-conceived shift – fall well short of the comprehensive, broad-based relief required to stimulate our anemic employment economy, raise our lagging incomes or make the Palmetto State more competitive vis-à-vis its neighbors.
Until Palmetto State lawmakers cut wasteful spending and invest this money back into the economy, expect our competitive position to continue to erode… no matter what games are played with the tax code.
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ABOUT THE AUTHOR…
Will Folks is the founding editor of the news outlet you are currently reading. Prior to founding FITSNews, he served as press secretary to the governor of South Carolina. He lives in the Midlands region of the state with his wife and eight children.
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