BREAKING: South Carolina Adopts State EITC

South Carolina has become the 27th state to offer a state-level Earned Income Tax Credit (EITC) on top of the federal credit.

Lawmakers and advocates have worked for years to lower taxes on low-wage South Carolinians and their families through a refundable state-level EITC worth 20 percent of the federal credit. This year, in an unexpected turn of events, a nonrefundable EITC worth 125% of the federal credit was tacked on to a larger legislative package by Democratic lawmakers in an attempt to mitigate the burden of a proposed gas tax on lower-income workers. Governor Henry McMaster (R) vetoed the legislation for reasons unrelated to the EITC, but the legislature overrode his veto today, and the bill goes into effect July 1.

Although the enactment of a state-level EITC will bring much-needed tax relief to many low-wage South Carolinians, the credit could benefit many more if it were eventually made refundable. Those earning the least owe little to no income tax and are often unable to benefit from nonrefundable EITCs, despite paying other taxes like sales and payroll. According to the Institute on Taxation and Economic Policy, only about 2% of South Carolinians with the lowest incomes (below $21,000) will benefit from the new EITC. Eventually making the credit refundable would help more of these families make ends meet.

So far, 2017 has been a good year for the EITC. Montana and Hawaii have both passed bills that would create state-level credits and are awaiting approval from governors.

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