Gov. Mark Sanford said Friday he would support raising the tax on cigarettes by up to 53 cents a pack to cover Medicaid costs in exchange for a gradual rollback of the state income tax.

The governor's first major policy initiative since laying out a broad platform in January reverberated across the state and caused some discord among fellow Republicans.

Sanford's announcement came a day after the S.C. House gave key approval to a nearly $5.1 billion state budget that included a plan to pay for Medicaid - the health care program for the state's poor, elderly and disabled.

Just days earlier, a House panel considering reforms in health care spending thwarted attempts to raise the cigarette tax to better fund Medicaid, which needs about $192 million in state funds to maintain levels of service next year.

A 53-cent increase in the current 7-cent-per-pack cigarette tax would raise about $150 million a year, according to state estimates. If spent on Medicaid, the federal government would match that at $3 for every $1 the state spends.

"It's crucial we use the debate on Medicaid funding and the cigarette tax as a way to advance tax changes that will strengthen the economy," Sanford said. "Over time, this is a large income tax cut. It's not in this year. It's not in next year. But over time, it's a very significant income tax cut."

Over 15 years, Sanford proposes to reduce the income tax rate to 5 percent from 7 percent. Growth in personal income tax collections would be used to lower the rate.

On average, state income from the individual income tax has grown at 6 percent annually. Under Sanford's proposal, half the growth would be returned to taxpayers through an income tax credit.

In the first four to five years of his plan, Sanford said, the income tax rate could drop by half of a percentage point to 6.5 percent.

In touting his proposal, Sanford described it as a long-term tax cut that will benefit small businesses and wage-earners and make the state more competitive economically - producing jobs and generating revenue.

While running for governor last year, Sanford proposed extending the state sales tax to gasoline as a way to gradually phase out the income tax. He conceded Friday there is "no appetite" for that plan among lawmakers, but his new proposal was a "small step" in that direction.

In addition, the governor said his proposal is a bridge between the House and Senate, which are on a "collision course" on the cigarette tax issue.

To quell support for an increase in the cigarette tax, House GOP leaders on Tuesday proposed restructuring state tobacco bonds to close the gap in Medicaid spending and provide a stable source of revenue.

House Speaker David Wilkins, R-Greenville, said he wants to hear more details of the governor's proposal, but his first impression was not supportive.

"The concern with his plan at this stage is that it proposes a huge tax increase without a guarantee of a tax decrease," he said.

State Rep. Joel Lourie, D-Richland, said Sanford's plan is "a good starting point" for the cigarette tax debate.

And Senate Finance Committee chairman Hugh Leatherman, R-Florence, said he supports raising the cigarette tax as much as 53 cents to pay for Medicaid.

"I am really delighted and commend the governor for recognizing the fact that we have to provide recurring moneys for Medicaid," Leatherman said.

A coalition of business leaders and health care advocates expressed cautious optimism over Sanford's proposal.

"We are grateful that Governor Sanford's proposal acknowledges the need for a stable and secure source of Medicaid funding in the form of a cigarette tax increase," said Sue Berkowitz, a coordinator of the Cigarette Tax For Health Care Coalition who called Sanford's leadership "vital."

Taxpayer groups, though, panned the proposal, questioning whether it would offer tax relief.

"I don't think it's an even swap," said Don Weaver, president of the S.C. Association of Taxpayers. "The income tax reduction is a good idea if the state can afford it. ‘.‘.‘. But I don't see why the two are connected."

The Washington, D.C.-based Americans for Tax Reform urged Sanford on Friday to reconsider his "ill-advised plan."

But Sanford stood by his position that the proposal would result in a tax cut.

"By any measure, it's a tax cut over time. By any measure, it would make us more competitive in growing businesses and jobs."