Dear Friends:

This legislative newsletter is all about YOU – and YOUR MONEY.

Historic Income Tax Cuts

Significant tax relief is on its way to South Carolinians! Historic income tax cuts were passed by the House of Representatives this week following the budget debate. The bill is heading to Governor McMaster for his signature.

Perspective: I have served on various House tax committees for 16 years. Most of the recommendations we made went nowhere. Then, a few years ago, we implemented incremental tax reductions, lowering SC’s top income tax rate to 7%, the highest in the Southeast. It’s currently at 6%, and with this tax cut, it drops to 5.21%, which is competitive with NC and GA. Even better, given SC’s robust economic growth, this tax reform package includes annual triggers that will use additional revenue to reduce the state’s income tax to less than 2%, and maybe even eliminate it.

Fair Tax: When first elected, I sponsored the SC Fair Tax. Many Republican colleagues cosponsored, but over several legislative sessions, it didn’t move forward. It was too radical for most legislators because it upended traditional tax policy.

The tax reform we sent to the Governor is a fairer approach to income taxation. It lowers the rate and spreads it over a larger proportion of taxpayers. Currently, 44% of wage earners don’t pay state income taxes. Under this plan, forecasters expect 43% of filers will reduce taxes by nearly $308 million in the first year. 35% of filers will see no change, and 22%, while 22% will pay more.

During the debate, Democrats blasted the bill as a tax increase on working people. They were joined in their opposition by the Freedom Caucus.

Regrettably, few dig into the facts. I did. For all those earning less than $50,000 a year, the average income tax they would pay is about $70. The highest income bracket ($40,000-$50,000) would pay $92. It is doubtful that paying that tax will be a severe hardship, but like other taxpayers, they will have “skin in the game.” 

Income Tax Reform in Brief

• Delivering Real Tax Relief: We’re putting money back where it belongs—in the pockets of our citizens. The plan delivers over $308 million in immediate income tax relief, helping hardworking South Carolinians keep more of their earnings. Altogether, we have delivered $3.8 billion in income tax reductions since FY 2021–22.
• Immediate Cut: Lowers the current 6% income tax rate to 5.21%, benefiting a broad range of South Carolinians.
• Path to Prosperity: Commits to responsible, incremental cuts leading to a 1.99% flat tax rate, and ultimately eliminating the state income tax.
• First-Year Benefits: Over 78% of tax filers will see either a tax cut or no change in their liability beginning in the first year.
• Protects the Most Vulnerable: The first $30,000 in taxable income is taxed at just 1.99%, safeguarding low-income earners.
• No New Burdens: All current tax exemptions remain intact, preserving benefits for families, veterans, seniors, and small businesses.
• Boosts Jobs & Investment: A lower and flatter tax structure enhances SC’s business climate, encouraging entrepreneurship and attracting new jobs. For years, we’ve had the highest sticker rate, but flipping to AGI and lowering the rate makes us more competitive.
• Separates SC from Federal Mandates: The plan reduces dependency on Washington, D.C. tax policy, giving South Carolina greater control over its economic destiny.
• Higher Paychecks, Less Withholding: Withholding tables are being adjusted so taxpayers see larger take-home pay each month. That will also result in lower tax refunds because you won’t be letting the state government hold your money.
• Low Effective Rate: With the new structure, the effective income tax rate falls to just 2.5% — well below the national average.
• 44% of SC state revenue comes from income taxes ($6.6B) —this plan transitions the state to a more diversified, growth-driven revenue base.
• 44% of South Carolinians currently pay no income tax—this reform ensures the tax system remains balanced, broad-based, and pro-growth.

      Historic Tax Reform = SUCCESS!

SC HOUSE PASSES TAX CONFORMITY

Late Tuesday evening, after debating and passing the state budget, Representatives voted unanimously (121-0) to conform to President Trump’s ‘One Big Beautiful Bill’ that cuts 2025 income taxes for many.

Call to Action: The bill heads to the Senate, where there is concern that it will meet resistance. That would be unfortunate for you, me, and the Senators who oppose it. (Let your Senator know that passing tax conformity is a PRIORITY!)

Backstory on Conformity: Passing tax conformity is usually a routine annual procedure. This year is different because the just-passed SC tax reform bill will decouple the Palmetto State from federal tax policy, beginning with tax filings in 2027. We are one of three states that still fully comply with federal tax laws, which change at the whim of Washington politics. SC needs stability in its tax policy, and we are best suited to manage it.

There has been significant taxpayer confusion due to uncertainty about how to comply with the One Big Beautiful Bill for the 2025 taxes now being filed.

Passage of conformity by the House this week would allow filers to use tax deductions from last summer’s federal spending package, effective only for this tax season. The bill could reduce state revenues by an estimated $288 million for the fiscal year starting July 1.

It’s now up to the Senate to concur with the House bill to quickly resolve taxpayers’ uncertainty.

Disciplined State Budget Passed

The House passed the first draft of the state budget for 2026-27.  After about 17 hours of debate, the vote was 101-18, with bipartisan support. Only members of the ultra-conservative Freedom Caucus opposed it (as they typically do).

The $15.4 billion General Fund Budget is designed to meet the state’s needs. Our state is #1 for per-capita population growth and a national and regional leader in GDP and personal income growth. SC is a leader in attracting people and businesses.

The budget process starts with large requests from state agencies, universities, and local governments totaling $6.2 billion. Those were whittled down to $2 billion, a 68% reduction from initial requests to final allocations.

As a member of the House Ways & Means Committee, I can assure you that we used a disciplined process to deliver a balanced budget that takes a focused approach, emphasizing infrastructure, people, and fiscal restraint.

Here are highlights in the initial budget

The House budget includes over $1 billion in tax relief while still making strategic investments across the state. Major investments include:

Infrastructure & Transportation

• $500 million for road improvements across South Carolina
• $200 million for bridge modernization
• $125 million to accelerate interstate construction projects
• $100 million to speed up local road improvements

➔ What this means: safer roads, reduced traffic congestion, and faster project completion across the state.

Education & Schools

• $90 million toward teacher pay increases
• Raising the minimum teacher salary to $50,500
• $20 million for school safety improvements
• $8.7 million to provide free breakfast for all public-school students

➔ What this means: stronger schools, improved teacher recruitment and retention, and better support for students.

College & Workforce Development

• $95 million for SC WINS workforce scholarships
• $228 million for LIFE scholarships
• $61 million for Palmetto Fellows scholarships
• $80 million in need-based student grants

➔ What this means: more affordable college and expanded job training opportunities to build South Carolina’s workforce.

Public Safety

• Funding for 30 new BPS law enforcement officers and dispatch staff
• $24.5 million for Palmetto 800 statewide emergency communications
• $28.3 million for law enforcement infrastructure upgrades

➔ What this means: stronger law enforcement, faster emergency response, and safer communities.

Agriculture & Rural Communities

• $8.25 million invested in agribusiness programs

➔ What this means: supporting farmers, strengthening rural communities, and protecting South Carolina’s largest industry.

Why This Matters

Because SC is one of the fastest-growing states in the country, this budget ensures we invest in the infrastructure, workforce, and public safety needed to support that growth without raising taxes or unnecessarily expanding government.

Members of the Freedom Caucus attempted to slash parts of the budget, particularly those that made decisions they disagreed with. None of those efforts stuck. Budget leadership called their arguments disingenuous, saying the cuts were not about passing good legislation but about using them as reelection fodder.

PHOTO OF THE WEEK

I had a flashback this week while visiting with SC Civil Air Patrol cadets and senior adult members at the State House. I spent a dozen years in CAP, starting at age 14. CAP, a USAF Auxiliary, is a marvelous aviation education program for teenagers that builds character, discipline, and knowledge. CAP’s critical mission is air search and rescue when called on by the USAF.