Big win for workers! New income law could mean $3,139 extra — here’s who benefits most

Thanks to a new income tax law, millions of people in South Carolina will soon be able to keep more money in their hands. The law was signed on Wednesday morning by Governor Henry McMaster in a formal ceremony. The new legislation is called House Bill 4216, also known as the Income Tax bill. From tax year 2026, state income tax rates will be reduced for residents across South Carolina. The current three-tax-bracket system will be simplified into just two tax brackets to make it easier for taxpayers.

New tax brackets explained

Under the new system, people will pay 1.99% tax on income up to $30,000, as noted by The Sun. Income above $30,000 will be taxed at 5.21%, which is lower than the current top rate of 6%. Lawmakers have a long-term goal of reducing state income tax rates all the way down to zero. The law also includes automatic future tax cuts starting in 2027 if state tax revenue grows by 5% or more in a year. These cuts will continue until the top tax rate reaches 1.99% and eventually becomes zero.




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Tax savings for residents

Officials say the first phase of this tax change could save South Carolina taxpayers between $309 million and $325 million. Governor McMaster said the goal is to reduce the tax burden and put more money into the hands of working people. About 43% of taxpayers in South Carolina are expected to pay lower taxes under this new law. The top 1% of earners, with average incomes around $1.7 million, are expected to gain the most benefit, saving about $3,139 each year, as noted by The Sun.

Who benefits most

Middle-income and working-class families are expected to save around $146 per year on average. The lowest 20% of earners, with incomes under $23,200, will not see any tax savings from this law, as cited by The Sun. Some critics say that removing deductions and changing tax rules could increase taxes for about 23% of taxpayers, especially higher earners who itemize deductions. Critics also warn that fully removing income tax in the future could reduce state revenue by about 45% and impact public services.

Supporters like Americans for Tax Reform and Americans for Prosperity say the law will make South Carolina more competitive and attract businesses. In the US, nine states currently do not have any personal income tax at all, including Texas, Florida, and Wyoming. Overall, the law is seen as a big tax shift that could bring bigger savings for some people while offering little or no benefit to others.

FAQs

Q1. Who will benefit most from South Carolina's new tax law?

Higher-income earners are expected to gain the biggest tax savings under the new system.

Q2. When will the new income tax rates start in South Carolina?

The new reduced tax rates will begin from the tax year 2026.