COLUMBIA - Gov. Mark Sanford on Wednesday proposed increasing South Carolina's cigarette tax from 7 cents to 37 cents per pack, with the revenue paying for income tax relief.

But he could be in for a fight with lawmakers who want revenue from a cigarette tax increase to be spent on health care, and with tobacco farmers and smokers.

In the latest preview of his executive budget, Sanford proposed allocating $205 million for personal, corporate and small-business income tax cuts. He wants to send $98 million in annual revenue back to taxpayers. The 30-cent cigarette tax increase would generate an estimated $107 million annually to reduce income taxes further.

"This is a very modest proposal," Sanford said.

Increasing the tax would raise it from the nation's lowest to the same level as Georgia's and would make it slightly higher than North Carolina's 35-cent tax. Missouri's 17-cent tax would be the nation's lowest, with New Jersey the highest at $2.58. The national average is $1.01.

William Lawson, a Darlington County farmer, and his brother, Jim, grow tobacco, soybeans and turf grass on 2,800 acres that have been in their family since 1834.

"All over the United States tobacco is one of the most heavily taxed items," he said. "This section of the economy has paid its fair share of taxes. Tobacco is the sacrificial lamb."

The governor will release his full executive budget in January. The General Assembly will consider Sanford's proposals and draft its own version.

Sanford wants the cigarette tax increase to serve as a deterrent to smokers. In South Carolina, 22.5 percent of the population smokes, while the national average is about 21 percent. Also, Sanford said the tax relief component would make for "better economic soil conditions" in the state, which he sees as essential in recruiting and retaining businesses.

"We don't think we can be competitive in attracting jobs and capital to our state by being simply average," Sanford said. "We're competing with a whole host of other countries around the globe."

Gary Nolan, spokesman for Smoker's Club Inc., a smokers' rights group, said raising the cigarette tax would have a ripple effect. If a person smokes two packs a day, he or she would pay an additional $219 in taxes. He said that because smokers are typically middle- to low-income, the higher taxes could keep them from buying appliances or food, for example.

"Tobacco is the enemy du jour," Nolan said. "Let's not let big government punish people's lives."

Raising the cigarette tax has been an issue lawmakers have considered each year for about the last five years. But it has run afoul of pledges signed by legislators and the governor against new taxes.

Rep. Chip Limehouse, R-Charleston, said he's supported proposals to increase the tax in the past and will continue to do so as long as a significant portion of it is used for health care, including Medicaid. "If we don't fix Medicaid, we are going to break the economy in South Carolina," he said.

Rep. David Mack, D-North Charleston, said he's also in favor of increasing the tax. But he wants it to go toward providing health care to more children. Sen. Randy Scott, R-Summerville, supports a tax increase and would like to see it used to help smokers quit.

Sen. Brad Hutto, D-Orangeburg, said South Carolina is the last of the old tobacco states to increase the tax, which generates about $30 million a year, and has lost income in past years, he said. "We have left $100 (million) to $200 million on the table," he said.

Hutto wants any increase to go toward incentives for small businesses to provide health care coverage to workers. Lawmakers likely will compromise by spending new revenue on some form of health care, he said. The governor's plan for income tax relief would be a benefit mostly to the wealthy, Hutto said.

"He tried to pursue this notion of income tax relief coupled with a cigarette tax increase before," Hutto said. "It didn't pass then. It's not gonna pass now."

In two previous attempts to raise the tax, Sanford sought an increase of about 60 cents. He said this proposal should fare better because he's attempting a "rifle shot" instead of a "shotgun blast."

"If there is something I've learned over the last four years, it is has been that if we propose things that are too big, we really dissipate our odds of bringing about the outcome that we're shooting for," he said.

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Reach Yvonne M. Wenger at ywenger@postandcourier.com or 803-799-9051.