A plan to improve economic activity, boost income and reduce taxes may sound too good to be true. Nonetheless, Gov. Mark Sanford's plan received unanimous approval of the Senate Finance Committee on Tuesday. While the plan has been modified, it was a major part of the governor's campaign platform.

Under the governor's plan, the income tax bill for families earning $40,000 would be cut about $800 a year. The plan would lower the state income tax from 7 percent to 5 percent over 15 years. In 2001 and 2002 Sanford campaigned on a similar plan that would have increased the gasoline tax and eliminated the income tax over 13 years.

The governor was forced to modify his plan, he said Friday, because politics changes. Even with his party in control in the House and Senate, legislators seem adamant that only one tax will increase. Sanford understands and is willing to negotiate, horse trade, if you will, and appeal directly to voters to apply pressure. He appealed to voters last Sunday and Monday in a column published in newspapers across the state.

Sanford said all taxes are not created equal. South Carolina has the third lowest cigarette tax in the nation while paying the 13th highest income tax. In last Sunday's newspaper column, Sanford made his case to increase the cigarette tax by 53 cents a pack and talked about the benefits of lowering the income tax. If the money goes toward Medicaid, as the governor wants, it will help slow the hemorrhage of cost shifts in health care. For its $150 million match, South Carolina would get $400 million from the federal government. In turn, small businessmen and women, and individuals, may not see such a dramatic increase in insurance premiums.

A number of groups, including Beaufort Memorial Hospital and the state Department of Mental health, support use of a higher cigarette tax to get the federal Medicaid dollars.

Another reason he shifted to the cigarette tax is "partially the soaring cost" of gas. Sanford thinks the cigarette-tax increase, coupled with the income tax reduction,would help "create a more vibrant economy in South Carolina."

It's not exactly clear how state agencies can absorb $1.7 billion in lost state revenue over the next 15 years, in addition to $500 million in cuts over the last year.

Each dollar in income tax relief generates about $1.25 in economic activity, according to the governor's figures. He says his proposal will generate about $7 billion in additional economic activity in the next decade and a half.

During the campaign last year, College of Charleston economist Frank Hefner said, "Sanford has tried to É come up with a plan to reduce the tax burden and allow government to continue to operate."

Sanford's original economic blueprint would lower the individual income tax on South Carolinians and limit growth in state government until it becomes even with the national average.

Democrats are skeptical of the plan. They want to grow income tax revenue before cutting taxes in order to maintain government functions. "If you want income tax relief, I think that's fine. But don't pursue it when we've cut into our base so much that we're not providing the basic, essential services of government," House Minority Leader James Smith, D-Columbia, told the Associated Press this week.

Sanford argued Friday that a lower income tax would provide a more favorable economic climate and encourage businesses to locate in South Carolina. "That in turn drives job growth and personal income -- two of the keys to revenue growth in South Carolina," Sanford said. South Carolina has the second highest income tax rate in the Southeast behind North Carolina, and the 13th highest in the nation, he reiterates.

The Palmetto Institute, a year-old S.C. think tank, acknowledged last year that South Carolina has been in a downward spiral in recent years. Per capita income in 1999 was 82 percent of the national average. A year later, it had dropped to 81.3 percent -- 41st in the nation.

In the midst of $500 million in funding cuts and another projected shortfall in revenue this year, it's hard to imagine how a reduction in taxes will help struggling state agencies pay the bills. But Sanford contends it will.

In the 1980s, President Ronald Reagan used Arthur Laffer's plan, which cut taxes and increased the size of government. In the 1990s, taxes were cut. Refunds would engage the economy, the public was told, and growth would make up lost revenue. Sanford's plan is different from S.C. lawmakers. His plan cuts taxes and reduces the size of government.

The governor is on the right track. South Carolinians must examine how we tax and spend.

Still, the public needs more statistical information on how cutting taxes will spur the economy.