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Article published Nov 4, 2003
Sanford to unveil tax proposal
AARON
GOULD SHEININ
The State
Gov. Mark Sanford today will unveil a
plan to increase the cigarette tax by 61 cents a pack and extend the sales tax
to lottery tickets.The $222 million in new tax money could lower the state's
income tax rate.But unlike Sanford's previous proposal for increasing the
cigarette tax, the money would not fund Medicaid, the health care program for
the poor, elderly and disabled.That would gut the program, some health care
advocates say.According to details obtained by The State, Sanford's plan
would:uIncrease the tax on a pack of cigarettes to 68 cents, the national
average. The state's 7-cent tax is fourth-lowest in the nation.uApply the 5
percent state sales tax to lottery tickets, which aren't subject to sales tax.•
ower income taxes by 15 percent. The state's top income tax rate would be
reduced to 5.9 percent from the current 7 percent.Sanford today begins a
three-day tour of the state to promote the plan. His spokesman said the governor
wouldn't discuss details until today.In March, Sanford unveiled a similar
blueprint to lower income taxes and raise cigarette taxes. That plan would have
used the cigarette tax money to fully pay for Medicaid. This time, all the money
goes to income tax reduction."That's not a good thing," said Sue Berkowitz,
director of the S.C. Appleseed Legal Justice Center, which has worked with about
50 other groups for two years to persuade lawmakers to raise the cigarette tax
to pay for Medicaid. Sanford's plan "is going to destroy the program," Berkowitz
said. "This is pretty scary to think this is what he's going to float."Berkowitz
and other advocates worry the state has no other practical way to pay for
Medicaid.Lawmakers were rescued from slashing the program this year by a
one-time, $200 million federal bailout. That money won't return next year,
Berkowitz said.But Ken Jackson, president of the S.C. Association of Realtors,
said he thinks Sanford's plan is important."I've never been asked what the taxes
are (in South Carolina) on cigarettes and lottery tickets, but I'm often asked
about the high income tax," Jackson said. "It's impossible to know how many
relocations and jobs we don't get."Only 13 states have a top income tax rate
higher than South Carolina's 7 percent.Besides, Jackson said, Medicaid should be
paid for with dollars that are guaranteed each year, and the cigarette tax could
fluctuate from year to year.Ken Shull, president of the S.C. Hospital
Association, said he is "disappointed that (Sanford's) plan does not
specifically and permanently earmark the proceeds (of the cigarette tax) for
Medicaid." Instead, he said, it would "create an even worse situation, because
we will have permanently taken the cigarette tax off the table as a dedicated,
recurring source of funding for Medicaid."Sanford spokesman Will Folks would not
discuss the governor's plan for funding Medicaid. But, he said, Sanford "is
committed to fully funding Medicaid with recurring, general fund
dollars."Lottery Commission chairman John C.B. Smith Jr. also is concerned that
Sanford's tax plan would hurt education funding. Profits from lottery sales pay
for college scholarships, K-12 programs and school buses, among other things.
Increasing the price of lottery tickets would hurt sales, Smith said. "I would
sure hope that does not happen, because the net effect is just to siphon off
some percentage away from education," Smith said.In 2002, the lottery generated
$640 million in revenue.Sanford's plan has some Republicans in General Assembly
unsure of where their governor is coming from.State Sen. Jim Ritchie,
R-Spartanburg, said he supports Sanford's desire to reduce income taxes, "but it
requires a more realistic plan to achieve that goal, given our tremendous budget
challenges."When lawmakers return to Columbia in January, they will face
projected revenue shortfalls of at least $300 million as they prepare the
2004-05 budget. Medicaid costs are likely to increase as well, meaning paying
for Medicaid out of general fund dollars would be difficult.House Speaker David
Wilkins, R-Greenville, said he believes the House will insist that Medicaid
reform legislation pass before any cigarette tax is considered. That
legislation, which the House approved earlier this year, is before the
Senate.Sanford, too, supports Medicaid reform."I personally believe it's
irresponsible to raise the cigarette tax unless we have Medicaid reform,"
Wilkins said.While Sanford's plan does not use the cigarette tax money for
Medicaid, Wilkins said, other plans will."Just because the governor suggests it,
there's nothing to say this plan is going to pass."