Senate rejects cigarette tax on first vote

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Some senators who voted against the tax, however, said Thursday's vote was not the last word on the issue, and suggested votes could change if concessions are forthcoming next week on education and other issues.

Smith, R-Greer, said that if the $171 million measure is not approved, about $500 million cost of health care for the poor will be passed along to paying customers at the state's hospitals through higher insurance premiums and larger fees for health services.

A $171 million state contribution would draw down more than $300 million in federal matching funds, the combination of which would pay for hospital bills, doctors' services and prescription drugs.

Senate Finance Committee Chairman Hugh Leatherman, R-Florence, said that from a purely economic development perspective, the $500 million would ripple through the economy four or five times, producing billions in economic activity for the state.

But some opponents said the cigarette tax unfairly targets a vulnerable population who are unlikely to protest. And others complained that Medicaid is a government handout rife with waste and abuse.

"Medicaid needs to be cleaned up before we pour money into it," said Sen. Jake Knotts, R-Lexington.

The cigarette tax proposal was paired in the amendment with Gov. Mark Sanford's plan to trim the income tax rate to 5 percent from the current 7 percent rate. The reductions in income tax would be triggered in future years by resumption in growth in income tax collections and take several years to implement.

Sen. Larry Martin, R-Pickens, said rejecting the cigarette tax increase would be "one of the least prudent decisions we ever made, if we pass on a half-billion dollars."

Sen. Don Holland, D-Camden, said votes cast against the cigarette tax Thursday could change if those senators get concessions on education spending.

Sen. Gerald Malloy, D-Hartsville, said, "We may be forced to accept what the House sent us. We are big supporters of education, but right now the House has more in its version for education that the Senate. We're probably $80 million out of kilter," Malloy said.

"The person who finds a solution, we're just going to call him kingmaker," Malloy said.

The Senate will resume debate on the budget Monday.