A cadre of state lawmakers has proposed adding 32 cents per pack to the cigarette tax to help small businesses pay for health insurance.

Under the legislation introduced Thursday, the Small Business Health Insurance Premium Assistance Act, businesses with 75 or fewer workers would get Medicaid coverage for workers whose income is at or below 200 percent of the federal poverty level, currently $19,140 for a single employee and $38,700 for a family of four. The state would pay 60 percent of the insurance premium and the employer would be required to pay for at least 25 percent.

The South Carolina Small Business Chamber of Commerce was a driving force behind the legislation. It said 60 percent of small businesses in the state can't afford to buy their employees health insurance, and 850,000 residents are without coverage.

"It's our No. 1 issue," said Frank Knapp, executive director of the Small Business Chamber. "The cost of health insurance keeps on going up double digits every year."

South Carolina's current cigarette tax of 7 cents per pack is the lowest rate in the nation. The added 32 cents would mean South Carolina would collect 39 cents per pack, compared with 37 cents in Georgia and a 35-cent rate that North Carolina will start collecting in July. Supporters of the bill said the difference was not enough to put South Carolina in an "uncompetitive" situation.

The additional fee would net an estimated $112 million a year, which would allow the state to garner $217.5 million in matching federal dollars.

About 60,000 workers would qualify for the assistance. Oklahoma has a similar program in place and Arkansas passed an almost identical plan this week.

However, Gov. Mark Sanford's office said it would not support the bill because it calls for more taxes.

"We're always open at looking at ways to make health insurance more affordable for small business owners," said Sanford spokesman Joel Sawyer. "But the governor has long been on the record as being against any kind of tax increase unless there is a corresponding tax decrease."

Sanford is not the only politician opposed to tax increases, particularly in an election year. The House Ways and Means Committee last week rejected an amendment calling for a 30-cents-per-pack cigarette tax increase.

Rep. Paul Agnew, the lead sponsor on the new bill, said it is being met with "a groundswell of support" in the House. He said the tax increase was "modest" compared to 92 cents, the national average per-pack cigarette tax.

"I think this bill does save taxpayer dollars when you think about the amount we pay in South Carolina in terms of tobacco-related illnesses," Agnew said. "I feel that it's the right thing to do and long overdue."

Reach Kyle Stock at 937-5763 or kstock@postandcourier.com.