The fact that it is not Texas or Florida that had the highest rate of population growth due to net domestic migration over the past two years, but South Carolina, comes as a surprise to many. Though the secret is out about the Palmetto State being a great place to live, South Carolina lawmakers are not resting on their laurels. In fact, the legislative session scheduled to wrap up in South Carolina in the coming days will go down as a historic one featuring the enactment of landmark reforms that will make the state’s tax and regulatory climate even more attractive than is already the case.
On May 7, just three weeks after Governor Henry McMaster’s (R-S.C.) Tax Day signing of legislation that will give South Carolina the nation’s lowest flat income tax in five years, the South Carolina Senate voted for final passage on H.3021, the Small Business Regulatory Freedom Act. Once Governor McMaster signs H.3021 into law, South Carolina will become the fifteenth state with REINS Act-style law that subjects costly regulations to legislative approval.
H.3021 faced a rockier and more arduous path to passage in South Carolina than one might expect in a deep red state with GOP supermajorities in both chambers. In fact, H.3021 had to survive a gauntlet of five subcommittee hearings. The REINS provision was even removed from H.3021 during the last subcommittee meeting, but it was restored during the bill’s final full committee hearing, albeit with a higher threshold for legislative oversight.
The initial version of H.3021 that the South Carolina House passed last year would subject regulations with an annual economic impact of $1M over five years to an up-or-down vote in the legislature. However, when the REINS provision was restored during the final full committee hearing on H.3021, it was amended back in with a higher threshold of $10M over five years.
Opponents of H.3021 have already scored partial victories by removing the provision establishing a reoccurring sunset review process for all regulations, along with repeal of the requirement that two existing regulations be repealed for every new rule that is promulgated. As the bill heads to conference committee to sort out the differences between the House and Senate versions of H.3021, many are urging that the final compromise bill at least restore the original $1M threshold.
The most recent state-level REINS Act was enacted last month in Tennessee. For comparison, while the version of H.3021 passed by the South Carolina Senate sets a $10M annual cost threshold for legislative approval, Tennessee’s Regulatory Freedom Act requires any regulation whose cost exceeds $1M over five years to receive legislative approval.
“Across the country, we’re seeing a range of approaches, but the common thread is that regulations with meaningful economic impact receive an added layer of legislative oversight and approval,” said Candace Carroll, with Americans for Prosperity’s South Carolina chapter. “I’m hopeful that the REINS threshold will be reduced to $1M during conference committee negotiations on H.3021,” said Grover Norquist, president of Americans for Tax Reform, who added that “South Carolina lawmakers deserve a great deal of credit for enacting reforms this year that will begin phasing out that state income tax and help keep regulatory costs in check.”
South Carolina is not the only red state where a state-level REINS Act has faced greater opposition than convention wisdom would suggest for a red state. REINS Act legislation pending in Missouri has also run into resistance.
“Although Representative Ben Keathley (R) did a masterful job shepherding Missouri’s version of the REINS Act through the entire House process and passing it over to the Senate way back in mid-March, Senate leadership has slow walked the bill for some reason and does not appear overly interested in what should be a common sense, good government priority,” said former Missouri House Speaker Tim Jones.
“You would think that a bill like the REINS Act would be an easy lay up for a Republican supermajority who would want a stronger check and balance over Missouri’s administrative bureaucracy,” Jones added, “but with barely one week left in the Session, it appears to be hitting a brick wall.”
South Carolina’s Small business Regulatory Freedom Act passed with bipartisan, unanimous support. Nearly a third of the states now have a REINS Act-style law on the books, prompting some to ask when a federal REINS Act, which President Donald Trump has endorsed, will pass. The U.S. House has passed the federal REINS Act multiple times, but it has yet to receive a vote in the Senate.
If Congress declines to take up the federal REINS Act this year, there is a good chance that it will be many years before the REINS Act once again has a chance of passage. While some on Capitol Hill are asking why South Carolina lawmakers aren’t taking action on redistricting, legislators in South Carolina, where many Democrats have voted in the past year for a REINS Act and full income tax repeal, could just as easily ask members of the U.S. House and Senate why they’re not taking action on the REINS Act.
