COLUMBIA S.C. —  Several state lawmakers joined Gov. Henry McMaster Tuesday at the State House to introduce a new bill that would cut the state income tax rate by more than half.

As of March 2025, South Carolina’s income tax rate is 6.2% under a two-tier system.

The new bill would establish a flat income tax rate of 3.99% as early as next year, and if economic conditions are met, the rate would gradually increase to 2.49%.

“That makes us not only more competitive, but also more attractive to new businesses and more affordable for families to call South Carolina home,” House Ways and Means Chairman Bruce Bannister said.

According to The Tax Foundation, a nonpartisan tax policy nonprofit, the state ranks 33^rd overall on the 2025 State Tax Competitiveness Index.

“We are committed to reducing the income tax burden on our residents without shifting the tax load to other areas like property tax or sales tax,” Bannister said. “The reform’s a bold move and it comes at a cost of about $200 million.”

State leaders said they intend to keep all existing deductions and credits under the proposed legislation, including those for military families, senior citizens and families with dependents.

In his annual State of the State Address, Gov. McMaster pushed for new change to the state’s income tax rate, asking that lawmakers “keep cutting as much and as fast as we can until we can eliminate the personal income tax altogether.”

On Tuesday, the governor appeared to share the same enthusiasm.

“I look forward to having a tax reform package with lower taxes that I can have on my desk before this session ends so we can take another great step forward in the history of our state,” McMaster said.

The bill will now go before the House for consideration.