Will Columbia Really Reject Trump’s ‘No Tax on Tips?’

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by DIANE HARDY

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A big (yet still quiet) issue brewing in Columbia, South Carolina is likely to bubble to the surface soon: will the Palmetto State conform to President Donald Trump’s signature tax policy of “no tax on tips” and “no tax on overtime?”

To be honest, until last week this issue was not on our radar, but folks started reaching out to our organization, the Mom and Pop Alliance of SC, asking about it.

In an election year – and in a state that went +18 for Trump – how will citizens respond if their leaders don’t adopt this popular policy meant to allow mostly working-class folks to keep more of their hard-earned money? Most South Carolinians are unaware of efforts by the S.C. legislature last year to decouple our state from the Federal Tax Code, which would mean South Carolina would NOT adopt tax provisions laid out in Trump’s “One Big Beautiful Bill (OBBB).” 

South Carolina has historically adopted the Federal Code, but this could change going forward because of the passage of H. 4216 last session (which currently sits in the Senate). This bill lowers our income tax rate, but it also decouples the Palmetto State from the Federal Code.  

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Because it would lower South Carolina’s income tax rate, many have spun this as a “tax cut,” but given that South Carolinians would lose many significant deductions from which they currently benefit, we believe it is more accurate to consider it a “tax change.” It simplifies the code in the sense that Palmetto State taxpayers would lose their Federal $31,500 standard deduction, as well as retirement, military, social security, and partial capital gains deductions. Proponents of H. 4216 argue that a flat tax is fairer, and all SC residents should “have skin in the game.” 

Each year, state lawmakers vote on whether South Carolina will conform with the Federal Tax  Code, so this matter needs to be decided before they adjourn in May – and preferably very soon, as tax preparers need direction as to what to do with their clients’ returns, since this will impact 2025 filings.

There are many questions that need to be addressed long before the April 15, 2026 deadline. This uncertainty is creating a log jam because people can’t submit their returns, or worse, they would all have to be amended.  Would the S.C. Department of Revenue (SCDOR) automatically adjust taxpayer tips, overtime, enhanced standard deduction, and over 65-senior deduction if they later adopt conformity?  

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There is a stand-alone bill (H. 5167, sponsored by state representative April Cromer) which simply states South Carolina would adopt the Federal Income Tax code for 2025, and thereby the provisions in the OBBB would apply to us. However, adopting the provisions of the OBBB would mean South Carolina would lose tax revenue which would likely require governmental spending cuts. 

It is now up to the S.C. General Assembly to decide what to do. As we see it, here are the possible outcomes:

-The Senate refuses to pass H. 4216 and the legislation dies.

-The Senate amends H. 4216 and sends it back to the House.

-The Senate passes H. 4216 as written (meaning we would not conform to the OBBB) 

-The Senate attaches conformity language to H. 4216 and sends it back to the House 

-The House passes Cromer’s H. 5167 and conforms to the federal code for 2025.

The Mom and Pop Alliance of SC will be doing all we can to keep our members informed of any important updates, as this issue will likely be heating up soon!

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ABOUT THE AUTHOR…

Diane Hardy is a former nurse anesthetist turned entrepreneur, who (along with her business partner) recently opened her second franchise bakery in the Upstate. She is the Executive Director of the Mom and Pop Alliance of SC, which she founded during Covid upon discovering South Carolina’s over 400,000 small businesses had little representation in our State House. The Alliance provides education, communication, and advocacy for SC’s family-owned businesses. Her passion for South Carolina’s small business is strong, and as such she donates her time to the organization, accepting no salary or government funding.  Her love for our state isn’t new.  Before launching the Mom and Pop Alliance she was the founder and host of The Palmetto Panel (2014-2019), an annual statewide conference highlighting issues impacting South Carolina, which is set to relaunch in 2026. Diane has a bachelor’s degree in nursing and psychology from Michigan State as well as a master’s degree from MUSC.

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