Senate Majority Leader Shane Massey, R-Edgefield, speaks against a bill to use the federal income tax code for one year on Tuesday, March 31, 2026. (Screenshot of SCETV legislative livestream)
COLUMBIA — The Senate rejected a bill Tuesday that would allow taxpayers to take advantage of federal income tax cuts for the ongoing tax season.
The bill failed in a vote of 16-27. No Democrats voted for it, and 15 Republicans voted against it.
Opponents, including the Senate majority leader, repeatedly called the bill a bad policy that would benefit only some taxpayers and appear to make taxes increase next year.
Senate Majority Leader Shane Massey argued it undoes the entire purpose of the new law signed Monday that decouples from the federal tax code. Conforming again also means older South Carolinians won’t get a break on their home property taxes, and that’s more important, he said.
The debate put the chamber’s leading Republicans at odds: Senate Finance Chairman Harvey Peeler argued refusing to conform meant rejecting a tax break.
“That’s the crux of this bill,” the Gaffney Republican said. “If you vote to conform, South Carolinians can take advantage of these deductions when they file their returns. It keeps $288 million in their pockets, not in the government’s pockets.”
Peeler opened Tuesday’s debate with a query phrased in the form of a Shakespearean quote: “To conform or not to conform; that is the question.”
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The answer, the Senate voted, was not to conform.
The federal tax breaks, included under the sweeping One Big Beautiful Bill Act, would exempt taxes on overtime and tips, give seniors larger tax breaks and reduce income taxes across the board. The House passed the bill unanimously earlier this month.
Instead of picking and choosing taxpayers to get carveouts, the state should focus on more general decreases, argued Sen. Sean Bennett, a financial planner who has long fought for an overhaul of the state’s tax system.
“This debate is not about whether or not we support tax relief,” the Dorchester Republican said. “We do. Everyone in this body, I believe, supports tax relief, from our liberal to our most conservative members.”
The question, then, is how it’s done, Bennett said.
Legislators already passed a bill, which the governor signed into law Monday, that creates winners and losers in every tax bracket, reducing income taxes for an estimated 43% of filers in its first year and raising them for 23%. That bill also decouples the state’s tax policy from the federal government beginning with filings submitted in 2027 and gradually reduce the income tax rate. The idea is that the state shouldn’t depend on the whims of Congress to decide how much people will pay in income taxes.
The federal tax code “is not neutral, and it’s not fair, and it’s not how we should write tax policy in South Carolina,” Bennett said.
The estimated $288.5 million cost would mean major problems for the state’s spending plan for the year, Bennett said. The income tax cut already in law will reduce state revenues by $309 million for the fiscal year beginning July 1. Senators passed a further cut to seniors’ property taxes that would require another $259 million.
If senators agreed to the federal deductions, that could cause the House to ignore the property tax reductions so they don’t have to cover the full cost, Massey said.
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And the $288.5 million estimate is only if legislators fund the conformity bill for one year. That’s what the bill requires, and representatives who proposed it said they intend to stick with the plan of splitting from the federal government for the 2027 filing season.
But Massey questioned whether that was really the case. Taxpayers who got a major break this year would likely feel as if their taxes went up next year instead of feeling the break legislators intended with the law already in effect, he said.
“If we conform, then we’re setting people up for a tax increase in that time,” the Edgefield Republican said. “And then we’re the ones who get blamed for it, right?”
Keeping the federal code for another year would cost $534.1 million, according to estimates from the state Revenue and Fiscal Affairs Office. Ultimately, that could come at the detriment of the tax law legislators worked hard to pass, Bennett said.
“For me, it comes down to long-term stability versus short-term simplicity,” Bennett said.
Taxpayers can still take advantage of the breaks when they file their federal income tax returns, Massey said. They just won’t have the same reductions available on their state income taxes.
Massey called the bill “an election year game” the House was using to garner support, since every representative is on the ballot in November.
Senators, who don’t face election until 2028, shouldn’t play the same games at the expense of state policy, Massey said.
“If you just look at it in a vacuum, if you put the blinders on and that’s all you’re looking at, then conformity is the best decision,” Massey said. “But if you look at all the consequences and all the pros and all the cons, I think over the long term, the better policy is not to conform.”
Supporters have said the bill was meant to address confusion among taxpayers and their accountants over how to file their taxes for the year. As the April 15 deadline loomed, legislators fielded questions from tax preparers and filers asking how they should proceed.
Uncertainty of how the bill would fare in the Senate led the state revenue department to extend the deadline for taxpayers to file for an income tax refund to Oct. 15. More than 1.3 million people had filed their taxes as of March 20, according to the agency.
Most of the people Massey has spoken to support the idea of no longer depending on Congress to set a tax policy, he said. They just wanted a definitive answer on how to file their taxes.
“I hope that today we gave them some certainty on that,” he told reporters.
Courtesy of South Carolina Daily Gazette
