South Carolina Set to Join the Flat Tax Revolution

With Gov. Henry McMaster’s signing of H.4216 on Tax Day, South Carolina is set to join the Flat Tax Revolution.

For years, South Carolina wore an unwanted label: the Southeast’s highest personal income tax rate. At 7%, the Palmetto State sat atop the wrong kind of ranking. However, that era is coming to an end.

In 2022, the General Assembly passed the Comprehensive Tax Cut Act, which at the time was the largest income tax cut in South Carolina history. This legislation reduced the top rate from 7% to 6.5%, collapsed the brackets, cut the property tax for manufacturers, and delivered a one-time $1 billion rebate to taxpayers. This marked the start of the Palmetto State’s campaign to boost competitiveness.

The next year, the top rate was trimmed to 6.4%; in 2024, lawmakers dropped it to 6.2%. By 2025, the rate fell to 6%, saving taxpayers an estimated $193.5 million.

Now, with H.4216 in place, South Carolina’s three-bracket income tax system will be simplified to a two-rate structure. Taxpayers will be subject to a 1.99% rate on taxable income up to $30,000 and a 5.21% rate on taxable income above $30,000, down from 6.0%. This move will save taxpayers an additional $325 million annually.

Beginning in 2027, if personal income tax revenues increase by at least 5%, tax rates will be further reduced until the top rate reaches 1.99%. At this point, South Carolina will officially become part of the Flat Tax Revolution.

Since 2022, nine states have switched from progressive to flat personal income taxes. Arizona, Iowa, Georgia, Mississippi, and Idaho did so in 2022; Louisiana and Kansas in 2024; and Ohio in 2025.

If the revenue triggers in H.4216 are met, South Carolina would have the lowest flat personal income tax rate in the nation, below Arizona’s current 2.5%, and could eventually join the ranks of states with no income tax, like Texas, Florida, and Tennessee.

As we have detailed for 19 years in Rich States, Poor States, taxpayers vote with their feet in favor of economic opportunity. Lowering income tax rates is a great way to improve economic outlook and attract job creators and new residents. According to the latest Census Bureau net domestic migration data, North Carolina led the nation in net domestic in-migration, followed by Texas, South Carolina, Florida, and Tennessee. Altogether, these states have added nearly 283,000 new residents between 2023 and 2024. These states have demonstrated a commitment to lower taxes, limited government, and fostering economic opportunity and prosperity.

With lower income tax rates and a simpler tax code, the Palmetto State is sending a clear message: South Carolina is open for business. The states that win the competition of the next decade will be the ones that allow taxpayers to keep more of what they earn and embrace economic opportunity through the free market.