Nancy Mace lays out plan to eliminate SC income tax in 5 years. Would it work?
When U.S. Rep. Nancy Mace formally kicked off her campaign for governor, she included a presentation called “South Carolina’s Path to Prosperity” with displays her staff had on easels.
One of the boards was titled “5 years to zero” and was Mace’s plan to get to having no state income tax in five to seven years.
It’s a plan that included:
- Capping the general fund spending at $11.6 billion a year
- Using surplus money above that cap toward an income tax reduction
- Pausing, reducing or eliminating earmarks
- Mandating a 4% cut a year by every state agency for five years
- Eliminating boards and commissions that don’t serve key functions
- A hiring freeze and offering early retirement
- Auditing administrative overhead and sunsetting low impact or duplicative government programs.
Calling for the elimination of the state income tax is a common policy point from the Republican candidates for governor. It comes as South Carolina lawmakers push legislation to phase out the state’s income tax over time as long as revenues to the state remain high enough not to effect services. The House earlier this year passed a phase out plan. The Senate is expected to consider it next year.
The general fund budget was set at $13.2 billion in recurring spending this fiscal year, which began July 1, and state income tax represents more than $6 billion of annual money of state general fund revenue.
Would Mace’s plan work?
It can, but would require decisions on cutting services, replacing lost income tax revenue, relying on revenue growth or some sort of combination.
“Mace’s plan ties tax relief to general fund revenue growth to offer a stable, tax cutting process without jeopardizing the state’s budget,” Mace campaign spokeswoman Piper Gifford said.
However, questions of how much growth to expect remain.
Cutting 4% of the budget would amount to about $530 million. Over five years that amounts to a $2.6 billion cut from state expenditures.
Mace’s plan also includes shrinking the state government workforce.
Her team said any early retirement program for state employees would work similar to what the Trump administration pushed earlier this year. People who are offered and accept an early retirement will see the position phased out. Mace also would eliminate jobs deemed a diversity, equity and inclusion position.
Mace’s plan does not include what specific programs or services she would want to see cut from each of the state’s agencies, but her campaign said it won’t be necessary for state agencies to carry out plans they lay out in annual budget requests to cut 3% of their spending in the event of budget reductions.
Instead, Mace’s campaign said she would target “wasteful, duplicative, redundant programs in state government.”
“We will also require each agency to identify wasteful programs when Mace is sworn into office,” Gifford said. “We have a lot of work to do, and it will commence on her first day in office.”
Mace said in an interview that the elimination of boards and commissions that don’t serve key functions and duplicative programs would be in addition to the 4% cuts.
A governor cannot unilaterally reduce an agency’s spending plan by 4% when an annual appropriations bill reaches his or her desk. He or she can only line item entire dollar amounts set aside for each agency. Doing a line item veto would wipe out an agency’s entire budget, which the state lawmakers can override. The power of the purse lies with the legislature, and reducing an agency’s budget would require lawmakers to enact the cut.
Also, under the state constitution, a governor isn’t allowed to not spend money once it’s been appropriated by the General Assembly. A state Supreme Court decision in 2009 said executive agencies have to comply with a state law until it’s been otherwise declared invalid.
In January, before Mace formally launched her bid for governor, she said a tax cut would help stimulate the economy and bring in more revenue to the state as people may be likely to spend more.
“People can buy more and there’s also consumption tax at the local level as well that the state can get in on,” Mace said in January.
In addition to income tax, the state has other revenue sources such as sales and use taxes, corporate income tax, bank taxes, tobacco, liquor, insurance, deeds, admissions and other fees.
Mace’s campaign did not provide an estimate of how much other revenue sources would grow as an income tax goes away.
“It’s going to be based on revenue and fluctuations in the revenue so that it’s stable. There’s only going to be so much you can do every year. It’s going to be based on the revenue,” Mace said in a recent interview of how she envisions the income tax rate coming down.
According to the Revenue and Fiscal Affairs office, those non-individual income tax sources grew by a total of $3.3 billion between 2017 and 2024.
However, that time period also includes the pandemic growth experienced by South Carolina where the state saw revenue grow from $10 billion to $13 billion in one year as federal COVID stimulus spending worked its way through the economy. Individual income tax revenue grew from $4.5 billion in the 2019-20 fiscal year to $6.2 billion in the 2021-22 fiscal year.
The other revenue sources grew from $4.7 billion in 2019-20 to $6.8 billion in 2021-22.
The more than $2 billion in growth has since leveled off and budget writers are now working with normal growth levels. Non-individual income tax revenue grew by $552.7 million in 2022-23 fiscal year, and by only $258.5 million in the 2023-24 fiscal year.
State income tax revenue also grew by $327 million from 2022-23 to 2023-24, even as the state’s highest marginal rate has been reduced as part of 2022 tax cut plan.
Mace also wants to reduce or eliminate earmarks, also known as legislator-directed spending for specific projects usually in their districts. Money for earmarks is listed as one-time spending in annual budget documents and usually is paid for with one-time dollars. Each earmark also needs to have at least one legislator publicly listed as a sponsor, and earmarks have been used by budget writers to get support for the overall spending plan from other lawmakers from both sides of the aisle.
Governors can veto earmark spending, but lawmakers can always override a governor’s objection. It was a practice seen regularly during previous administrations.
Legislators spent $400 million on earmarks in the 2024-25 budget. Even Senate Finance Chairman Harvey Peeler said earmarks requests were out of hand and budget writers opted to not include them in the 2025-26 budget.
The one-time expenditures, however, are paid with one-time revenue that usually are unbudgeted surpluses from previous years.
Still, as the legislature has the power to direct how money is spent, the governor only has a bully pulpit to advocate for how to best allocate resources.
The governor’s executive budget, often referred to in the annual state of the state address, ultimately is a policy document of how he or she believes money should be spent.
“As the fourth-fastest-growing state in the country, with South Carolina’s continued growth, amplified by a pause on some or all earmarks, streamlining the state’s systems and processes, removing redundancies and duplicative programs, we can build an economy that allows South Carolina families to keep more of what they earn,” Gifford said.
Current state individual income tax
In 2022 lawmakers adopted a plan to reduce the state’s highest marginal income tax rate from 7% to 6% over five years as long as revenue growth was high enough. That plan was accelerated in recent years. The current highest rate is 6%, but because the state starts income tax calculations with the federal taxable figure instead of adjusted gross income, 44% of tax filers don’t pay any income tax to the state.
According to the state’s Revenue and Fiscal Affairs office, in 2023, a family of four with an adjusted gross income of $60,000 paid $810 in South Carolina income taxes for an effective rate of 1.35%, lower than neighboring states.
This story was originally published November 17, 2025 at 5:00 AM.
