South Carolina Proposes Accelerated Income Tax Cuts: Flat Rate of 3.99% by 2026

South Carolina is joining a growing list of states aiming to streamline and reduce personal income taxes. In a newly proposed bill backed by Republican leadership, the state plans to accelerate the reduction of its income tax rate, targeting a flat 3.99% rate by 2026, down from the current 6.2%.

This move positions South Carolina alongside other tax-reforming states such as Mississippi, Kentucky, and Louisiana, and reflects a broader trend toward state income tax reduction in pro-growth policy frameworks.

Key Highlights of the South Carolina Tax Proposal

The 2025 proposal lays out a multi-year plan to bring South Carolina’s personal income tax rate in line with neighboring low-tax states. It includes:

• Reduction of the top personal income tax rate from 6.2% to 3.99% by 2026

• Further cuts to as low as 2.49% if revenue growth continues

• A unified flat tax structure to replace the current bracketed system

• No increases to sales taxes or corporate taxes to offset revenue loss

Governor Henry McMaster emphasized that the proposal would benefit all taxpayers, including low-income earners, by creating a more transparent and predictable tax code.

Why Is South Carolina Cutting Taxes?

Supporters of the tax cut argue that South Carolina’s strong economy, fueled by business investment and population growth, can support lower income tax rates without sacrificing public services. The proposal is designed to:

• Boost economic competitiveness in the Southeast

• Attract new residents and businesses to the state

• Reduce the tax burden for working families and retirees

According to Republican leaders, the state’s budget surplus and rising revenue from consumption-based taxes will make the cuts fiscally sustainable.

Impact on South Carolina Taxpayers

Here’s what this proposal could mean for residents and small business owners:

• Immediate tax relief starting in the next fiscal year

• Simplified tax filing with a single flat rate

• Potential savings of hundreds to thousands of dollars annually, depending on income level

• Greater incentive for retirees and remote workers to relocate to South Carolina

Legislative Outlook

The South Carolina legislature has under two months left in its current session to pass the proposal. Given strong Republican support and the governor’s endorsement, many expect the bill to move quickly.

However, critics have raised concerns about whether the plan could create future revenue gaps, especially during economic downturns. Lawmakers will need to assess long-term budget impacts and monitor revenue projections closely.

Final Thoughts

The South Carolina income tax cut plan is part of a broader movement among U.S. states seeking to reduce income tax burdens to stimulate growth. If passed, it could make South Carolina one of the most tax-friendly states in the country.

Stay informed with Bizora as we track this and other state-level tax policy changes impacting individuals, businesses, and tax professionals.