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Issue: Elimination of state income tax in South Carolina
State lawmakers have set a path for the state to eventually eliminate the state income tax. The plan includes a phase out of the income tax over several years as long as revenue to the state continues to grow.
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Alan Wilson, Republican nominee for governor
Attorney General Alan Wilson, the GOP nominee for governor, has said he supports eliminating the state income tax, but in a measured approach.
Wilson said in an interview in March he would want to cap growth in the state budget to inflation and population growth.
“You don’t want to cut streams of revenue that fund vital core functions of government, like public safety, infrastructure spending at DOT, for instance, energy grid expansion. So these are things that we have to be cognizant of,” Wilson said in March, adding that his plan would be implemented over several years.
Jermaine Johnson, Democratic nominee for governor
State Rep. Jermaine Johnson, a Richland County Democrat who was first elected to the House in 2020, said it may be impossible to eliminate the state income tax because of how much it pays for in the state budget.
He also was critical of the plan to phase-in the elimination of income tax that was signed earlier this year.
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“What they didn’t tell you is that there are 40% of South Carolinians who were already not paying income tax, they were getting it back in the form of a refund, they just took down those 40% who were not paying income tax took them up to 1.99% and they will not even realize that they will not get the refund back that they got last year until next year when they file their tax returns,” Johnson said during a debate in June.
Johnson said in the debate he would plan to go from 40% to 70% of residents not paying state income tax.
What is current state income tax policy in South Carolina
Currently, the highest marginal income tax rate is 5.21%. Any income lower than $30,000 is taxed at 1.99%.
The leading candidates for governor have different views on whether South Carolina should actually eliminate the state income tax. The income tax represents more than 40% of revenue for the state’s annual budget.
Through the reform, which includes a switch to using adjusted gross income instead of federal taxable income as a starting point in tax liability calculations, 22% or about 624,000 tax filers will see an increase in how much they pay in income tax.
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