A 30-cents-per-pack tax increase on cigarettes would partially fund a $205 million income tax cut in Gov. Mark Sanford’s budget next year.

This is the second time Sanford has proposed increasing the cigarette tax in order to reduce income taxes. The new version, rolled out Wednesday, is about half the size of one he introduced in 2003, but some lawmakers criticized his plan to use the money for tax cuts instead of health care or insurance.

Swapping a cigarette tax hike for an income tax cut, Sanford said, would reduce the number of smokers and make the state more business-friendly.

“It’s a modest step forward, but again an important one,” the governor said.

At 7 cents a pack, South Carolina has the lowest cigarette tax in the nation. North Carolina’s will increase to 35 cents in July, while Georgia’s is 37 cents. The median U.S. tax is 80 cents.

Sanford’s plan would work like this:

• The cigarette tax would be increased by 30 cents a pack, raising $107 million.

• $98 million from the general fund would be added to pay for $205 million in income tax cuts.

• Sanford said he would work out details of the income tax cut with lawmakers, but it could be applied to reducing the corporate income tax rate, the individual income tax rate or indexing tax brackets for inflation — or any combination of those.

The Legislature has discussed the issue before, but the plans died for a variety of reasons ranging from anti-tax sentiment to differences over how the money would be spent.

“We’ve been stuck on dead center for a long time,” Sanford said.

Last year, a coalition of Democrats, some Republicans and small businesses introduced a bill that would raise the cigarette tax and use the money to expand insurance for the poor and small businesses. That plan failed, in part, because health care costs would increase while declining smoking rates would mean declining revenue.

Lawmakers said Wednesday Sanford’s choice not to use cigarette tax money to aid health care costs could be the plan’s downfall.

“We’ll take a look at it, but we’re reluctant to raise any taxes,” said Senate Majority Leader Harvey Peeler, R-Cherokee. “The money should go to health care.”

Democrats agreed, noting 20 percent of state residents have no health insurance.

“A cigarette tax would go a long way to closing the insurance gap that exists in our state,” said Sen. Brad Hutto, D-Orangeburg, “and help small businesses provide coverage for their employees.”

Rep. Rex Rice, R-Pickens, has been the House’s chief cigarette tax increase advocate.

Rice agreed the money should be used for health care but would support the governor’s plan if it raises the cost of cigarettes. The bigger concern, he said, was to discourage smoking.

Rice thought the House was getting close to approving the increase. Between bills and amendments last year, the House voted on cigarette tax hikes — in various forms — at least six times.

At some point, Rice said, a majority of members voted yes on one proposal or another.

“You had enough votes to pass it if you could have gotten them all together at one time,” he said.

Reach O’Connor at (803) 771-8358.