Economic Impact Analysis: House Republicans’ Income Tax Plan Will Boost SC Economy

Palmetto Promise Institute, in collaboration with The Buckeye Institute, has conducted an economic impact study on the newly amended H.4216, a proposal by the state’s Republicans leaders to move South Carolina’s highest-in-the-southeast income tax to two tiered rate of 5.39% and 1.99%, based on Adjusted Gross Income (AGI). Our findings show how South Carolina’s economy would benefit from the proposed legislation over the first five years (2026-2030). The individual income tax reform plan outlined in H.4216 is a smart tax policy that reduces the burden on taxpayers and more precisely aligns South Carolina’s tax code with other states. The plan focuses on moving to a flatter rate structure, while simultaneously broadening the tax via the adoption of federal AGI as the standard for determining that base.

Broadening the base and moving to these lower rates will result in South Carolina’s economy adding 1,000 jobs in 2026 and between 2,000 and 3,000 additional jobs each year between 2027 and 2030. South Carolina’s GDP will grow by $360 million in 2026 and average $920 million annual growth between 2027 and 2030. Families will buy more because, they will have more money to purchase goods, and save and invest over $110 million (and up to $400 million) annually each year over the next five years.

Dynamic economic modeling, which considers how people and businesses respond to policy changes, shows that this tax plan will make South Carolina a more prosperous state and poised to compete with neighboring states that have already enacted tax policy reform over the past few years.

The scenario below models collapsing all current personal income tax brackets in South Carolina into these two brackets. The table presents the dynamic effects of this scenario. Under this scenario, South Carolina’s economic output (GDP) would increase by $360 million (2024 dollars) in 2026, with investment increasing by $170 million and consumer spending increasing by $110 million in the same year. Ultimately, the number of jobs for 2026 would be expected to increase by 1,000.

Download this economic impact analysis in PDF form.

METHODOLOGY: The Buckeye Institute’s economists calculate these numbers using STELA, their State Tax & Economic Long-Run Analysis tax model. It is designed to measure how government changes to tax policy impact jobs, economic growth, consumer spending, business investment, and government revenue. STELA underwent a double blind peer review consistent with academic standards and methodologies, and the Buckeye Institute has successfully used STELA analysis in sixteen states.

DATA KEY: In the baseline (numbers at the top of the chart on the next page), all economic measures are in millions of 2024 dollars, rounded to the nearest $1 million, while the employment measure is in thousands of non-farm jobs, rounded to the nearest $10 thousand. In the difference from baseline (numbers at the bottom), all economic measures are in millions of 2024 dollars, rounded to the nearest $10 million, while the employment measure is in thousands of non-farm jobs, rounded to the nearest $1 thousand.

So what’s the takeaway? Under the new two-tiered income tax system outlined in H.4216, the South Carolina economy would see enormous benefits across the board within the first five years, even before the income rates continue to flatten and eventually move to zero.

This is a tax plan that is good for South Carolina citizens and good for South Carolina’s economy. Let’s get it done.