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Tax swap is wrong course
A higher cigarette tax should not fund an income tax cut but rather be directed to health-care needs.

Published: Sunday, December 24, 2006 - 6:00 am


Gov. Mark Sanford has once again proposed a tax swap: raising the cigarette tax to lower business and personal income taxes. That's not an appropriate way to use a cigarette tax hike.

Revenues from a cigarette tax increase should go toward bolstering Medicaid health care for the poor. The state spends an estimated $1 billion a year on cigarette-related health-care needs. At least $362 million of that cost is borne by taxpayers. It's only fair to ask smokers to pay a higher cigarette tax and shoulder more of the cost of cigarette-related illness.

At 7 cents a pack -- the lowest in the nation -- South Carolina's cigarette tax is disgracefully paltry given the number of health-care needs in the state. It's true that a cigarette tax is a regressive one, falling most heavily on poorer South Carolinians. But poorer South Carolinians also benefit most from Medicaid.

It doesn't make much sense, however, to use a cigarette tax to subsidize income tax cuts. That would place a higher burden on low-income South Carolinians for the higher wage-earners who benefit the most from income tax cuts.

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Granted, a higher cigarette tax would have positive benefits -- whether it's enacted by itself or as part of a tax swap. A higher cigarette tax discourages smoking, especially among young people.

But a tax swap is not the right course. A higher cigarette tax by itself could bring in millions of dollars in new revenues for unmet health-care needs in the state. A 30-cent increase, for instance, could generate $107 million. Moreover, state money spent on Medicaid often draws down $3 in matching funds from the federal government.

That's money that could be used to help the uninsured -- 700,000 South Carolinas -- obtain health insurance. It could be used to help businesses afford health insurance for their employees. It could be used to fund programs to help smokers quit and keep children from starting. It could support mental-health services. The state might be able to provide health coverage for more children as well: South Carolina is one of only a few states in the nation that doesn't provide health care for children in families of up to 200 percent of the poverty level.

Income tax cuts are not objectionable, but they should be funded through surplus funds if available. The cigarette tax should be reserved for health care.

Sanford has said he supports a cigarette tax hike only with a corresponding cut in another tax. He should reconsider: The governor would be showing real leadership in helping to improve the health and well-being of South Carolinians.