Despite the best efforts of House leadership to snuff it out this week, the cigarette tax to fund Medicaid, which was on life support Wednesday, may be burning with new intensity.

Between a week of rallies and Gov. Mark Sanford's conditional support for the move Friday, the rekindled fight is highlighting a philosophical divide in the Statehouse and the state over the best way to handle Medicaid.

It could turn into the first big fight of this General Assembly, and it could turn out to be a good measure of the new governor's influence among lawmakers.

At the beginning of the year, the cigarette tax was the big issue before the General Assembly, aside from the larger issue of the budget shortfall.

Facing a $1 billion budget deficit and skyrocketing Medicaid costs, many lawmakers were resigned to doing what they despise and fear more than anything: raising taxes.

The cigarette tax, which came within five votes of passing the House last year, was seen as a fairly attractive option, as far as taxes go. It affects slightly more than a quarter of the people and seems to many a logical choice to cover rising medical expenses.

Even though tobacco is a major cash crop for South Carolina, lawmakers from tobacco-growing counties were willing to go along with some increase, as long as the money was earmarked for health care. After all, the state's 7-cent tax on a pack of cigarettes is substantially below the national average of 60 cents.

The rub was that many state lawmakers had signed pledges to anti-tax groups that they wouldn't raise taxes. Still, there has been a bipartisan effort to raise the tax.

At the beginning of the week the tax seemed less likely. The Medicaid reform bill, with the cigarette tax hike included, was targeted by House members.

House leaders Tuesday announced a plan to fund Medicaid by restructuring the state's tobacco settlement bonds. They said the plan was a 15-year fix for the Medicaid problem that avoided the need for new taxes. The next day, the committee crafting Medicaid reform struck the cigarette tax from its legislation.

It appeared to be a one-two knockout punch packing a loud message.

"Prior to (the bond) restructuring, there was some good reason to be for the tax, although I didn't favor it," said House Majority Leader Rick Quinn, chairman of the Medicaid panel. "If they do it now, it's for raising more revenue."

Many other House Republicans said that support for the tax had either eroded or gone up in smoke.

But cigarette tax supporters were quick to disagree. The lawmakers pushing the tax said it was still the best way to fix Medicaid. The interest savings from refinancing the bonds, which would help fund Medicaid, was non-recurring money. (The bonds were taken out to avoid waiting 30 years for $3.2 billion in settlement payments.)

Democrats said Republicans stole the idea from Gov. Jim Hodges, who had proposed refinancing the bond to help balance the state budget. But using that money for ongoing, rapidly increasing Medicaid funding was just wrong, some lawmakers said.

"It's irresponsible," state Rep. James E. Smith, the House Minority Leader, said of the plan.

PROPONENTS MOVE AHEAD

Proponents of the tax pushed forward with their efforts, even though the word from leadership was that resistance was futile. State Rep. Rex Rice, a Republican from Easley, vowed earlier this week to restore his plan for a 22-cent cigarette tax hike to the Medicaid reform bill when it reaches the House floor.

"I was told that no higher tax would pass," he said.

Rice said that House leadership's plan may have swayed "some of the people who were on the fence" to oppose a cigarette tax hike, but he thought many would see problems with it. "There's a lot of non-recurring money in it," Rice said, so it ultimately doesn't fix the problem.

For some people, this fight has always been about more than just finding quick-fix money. There are people who think Medicaid doesn't reach enough folks or provide enough services. Others believe the price of cigarettes should be raised to discourage smoking, particularly among teenagers.

Many of those advocates converged on the Statehouse this week, lobbying lawmakers and trying desperately to stoke a fire they knew was burning out.

For two days, advocates of the tax protesting at the Statehouse outnumbered tax opponents by a 2-to-1 margin.

At the Thursday gathering of the Alliance for South Carolina's Children, Dr. Jim Durant, a Sumter County pediatrician, urged House leadership not to stand in the way of the increase and mentioned that he had lobbied Sanford for the tax. There are several reasons to raise the tax, he said, and no reasons not to.

"The cigarette tax should be raised as high as possible, and we should do whatever it takes to stop these young children from starting to smoke," Durant said. "If raising the price significantly will stop 11- and 12-year-olds from getting hooked on cigarettes, then I say raise it to the roof."

The demonstration was a strong showing but one that Sanford made a point of saying had nothing to do with his decision to step into the fray Friday.

Sanford wants to tie a cigarette tax increase to a long-term plan to reduce the state income tax rate from 7 percent to 5 percent over 15 years. He said the plan would bridge the gap between the competing ideas being volleyed around the House and Senate. The cigarette tax for Medicaid would leverage hundreds of millions of dollars, and the money the state could save, assuming there is reform to the system, could go toward gradually reducing the income tax.

"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.

"This proposal does two things. First, it's a significant long-term tax cut that's going to benefit small businesses, sole proprietorships and personal income earners. Second, it's a bridge between where the House and the Senate are with respect to the cigarette tax increase, something that we're headed down a collision course on unless we find a way to build that bridge."

That's going to be the trick now. Sanford is talking about an increase in the tax to the national average of 60 cents -- a 53-cent hike. Some folks don't favor raising the tax beyond the Southeast average, which is less than 20 cents. Others adamantly oppose any tax.

While Sanford has helped re-ignite the debate, it may not pull any of these factions together. Many lawmakers oppose a tit-for-tat trade on the tax and may push an increase without such a provision.

Senate Democratic Leader John Land, D-Manning, who represents several tobacco counties in the Midlands-PeeDee area, said a trade-off would be admitting the state had more than enough money, and he could not support a tobacco tax hike under the circumstances.

Sanford may not like that, and he is clearly not afraid to use his veto pen. If he strikes a tobacco tax, there almost certainly wouldn't be enough votes for an override.

But it may not get that far.

House Speaker David Wilkins said Friday that he had concerns over a plan that "proposes a huge tax increase without the guarantee of a tax decrease." For Wilkins, not a man who casually criticizes members of his own party, such a statement is perceived by some people as drawing the battle lines.

The cigarette tax increase may not be a certainty, but the proposal is still breathing.

"The combination of the governor's involvement in this and the fiscal irresponsibility of bond refinancing gives a great deal of energy and fuel and support for the passage of a cigarette tax," Smith said.

Contact Brian Hicks at (843) 937-5561 or bhicks@postandcourier.com.