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Great news for South Carolina taxpayers. In last night’s State of the State Address, Gov. Nikki Haley proposed reducing the state’s top marginal income tax rate from 7.0 percent to 5.0 percent, a 30 percent reduction.

This income tax reduction, which result in more disposable income for individuals, families, and small businesses across the Palmetto State, will be a boon to the state economy. It’s also a much needed reform in light of the competitive tax codes had by neighboring states.

As Gov. Haley pointed out in her speech:

“Some southeastern and southwestern states – Tennessee, Florida, and Texas – have no income tax at all.  Georgia’s tax is a full percent lower than ours, and just last year North Carolina cut theirs by two full points, to below even that…In that competitive environment, our state’s 7% income tax rate stands out and puts us at a disadvantage. In order to keep the ball rolling in our economy, we must bring down our income tax.”

South Carolina’s status as a Right-to-Work state that frees workers from coerced unionization makes it an attractive location for new investment, business relocation, and the subsequent job creation that follows. However, the state’s tax code relative to its neighbors and other states across the country are holding it back from reaching its full economic potential. Gov. Haley is smart to propose doing away with that hindrance. Gov. Haley’s effort to reduce the income tax is supported by a wealth of research.

Tax Foundation economist William McBride reviewed academic literature going back three decades and found, “While there are a variety of methods and data sources, the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions and monetary policy.”

In McBride’s survey of 26 studies, dating to 1983, he found “all but three of those studies, and every study in the last 15 years, find a negative effect of taxes on growth.”

John Hood, former president of the John Locke Foundation, found that keeping state and local tax and regulatory burdens as low as possible fosters economic growth, when he analyzed 681 peer-reviewed academic journal articles going back to 1990.

“Most studies find,” Hood stated, “that lower levels of taxes and spending, less-intrusive regulation correlate with stronger economic performance.”

“Gov. Nikki Haley has proven time and again to be a tremendous defender of taxpayers,” said Grover Norquist, president of Americans for Tax Reform. “This latest proposal demonstrates that she recognizes the need for pro-growth, rate-reducing tax reform. It also stands in stark contrast to President Obama, who used his recent address to call for hundreds of billions in higher taxes. Once again, Gov. Haley shows us that the best policy reforms are coming out of the states.”