The State’s Goal is to Reduce the Tax Rate by 0.1% until it reaches 6% from its original 7%
With South Carolina having the highest personal income tax rate in the Southeast and being the 12th highest in the nation, SC State Legislators and Governor Henry McMaster decided that it was time for an income tax cut.
In 2022, the state’s top tax rate was seven percent. That year the South Carolina Senate compromised from a desired 5.7% rate by passing along with the State House a new spending plan that would immediately lower 7% to 6.5 percent for the coming 2023 tax year. Beginning with 2024, over the next five years, it would reduce by 0.1 percent each year until it reached 6% in 2028.
This gradual tax decrease is not enough to keep South Carolina from being among the highest tax rate percentages in the nation. Also, the tax decrease happens only if the state revenue increases by at least 5% relative to the previous year. If the state revenue falls, the tax rate will remain the same as the previous year.
In June 2023, when SC Governor Henry McMaster signed the FY 2023-2024 budget into law, he stated, “Until recently, South Carolina had the highest personal income tax rate in the southeast and the 12th highest in the nation. No more. Last year, I was honored to sign into law the largest income tax cut in state history. This year taxpayers will keep an additional $96.2 million of their hard-earned money instead of sending it to state government.”
According to Tax Foundation, “Thirty-four states will be ringing in the new year with notable tax changes, including 17 states cutting individual or corporate income taxes (and some cutting both).” Will the first 0.1% decrease be enough for South Carolina taxpayers to notice, and the gradual five-year reduction to 6%? Only time will tell. For now, SC taxpayers will be among that number with the current reduction from 6.5% to 6.4% in 2024.
