Cigarette tax small price to pay for income tax cut

e-mail this story discuss this issue in our forums Guest column • Cort Flint: Some good things came out of King holiday debate (04/23/03) • Timothy D. Carter: Patients, state can ill afford more cuts to Medicaid (04/22/03) • Paul Krohne: Saving education funds requires community action (04/21/03) • David Shi: Education weighs heavily on students (04/20/03) • Marc H. Wilson: King debacle should lead to coalition for a new county (04/18/03) More details Republican Mark Sanford was elected governor of South Carolina in November 2002. He represented South Carolina's 1st Congressional District from 1995 to 2001.

I have long believed lowering income taxes is a big part of achieving a more vibrant economy in South Carolina. Yet despite my belief that this is critical to economic revival — which in turn fuels our budget — there is unfortunately no appetite for lowering taxes in the General Assembly.

There are a lot of great conservatives in the Legislature who see things similarly, but we can't generate enough enthusiasm at the key pressure points to get legislative support for cutting taxes. I would give particular credit to Speaker David Wilkins and kindred spirits in the House who are serious about holding the line on taxes — but those views are not universally shared in the Senate. That brings me to my job — trying to build bridges between the chambers, and the idea of a tax trade that has several "wins" in it for each and every South Carolinian.

First, all taxes are not created equal. By trading the cigarette tax increase for the income tax credit we have proposed, tax savings would be $117 million in the first three years, $219 million in the first four years, and — here's the kicker — $7.6 billion over the 15 years we'll use to reduce the income tax rate from 7 percent to 5 percent. That means a family making $40,000 a year would be able to keep roughly $800 more per year.

The second "win" in our plan is slowing the future growth of government. Colorado and New Mexico are both in much better budget situations than South Carolina, in large part because they held the line on government spending. Colorado has a legislative formula that limits spending, while in New Mexico, Republican Gov. Gary Johnson vetoed over 700 bills and held the rate of growth in government to 4 percent a year over the past eight years. His successor, Democratic Gov. Bill Richardson, has now been able to cut income taxes from 8.2 percent to 4.9 percent. He, like me, thinks lowering income taxes is a key to bettering his state's economy. By contrast, our state government's expenditures leapt by 9.35 percent as recently as 2000.

Third, this proposal brings us $400 million in matching health care funds. For every dollar we spend on Medicaid, the federal government gives us just over two dollars. That frees up more money to address profound needs in education, corrections and more. In the business world, could you imagine not taking advantage of an opportunity like that, particularly when our Medicaid system is short by nearly $150 million?

The last "win" belongs to patients and anyone who pays health insurance. Because America is not a country that dismisses someone from the emergency room if they can't pay, there is a substantial shift in cost from health care institutions to paying patients. With premiums rising at close to 14 percent per year, this phenomenon is the last thing self-insured patients need. Adequately funding Medicaid would lessen this impact because more people would be covered.

Ultimately, the most important consideration is the patient. As a conservative, I don't believe government exists to help those who can help themselves, but the people impacted by Medicaid are without financial means. We are working aggressively to reform the system, as evidenced just a few weeks ago when we offered a preferred drug list that would take advantage of the state's buying power and save Medicaid $13 million each year. But another part of reform is adequately funding it. Doctors must be willing to take Medicaid patients so that we can save money by focusing on preventive care, rather than simply continuing what Medicaid now does — treating symptoms.

For conservatives who want lower taxes, those who care about health care and business people concerned about health insurance premiums, there are numerous wins in our proposal. There's still time for us to make our voices heard, and I'd ask you do that.

In the meantime, I'll make two commitments: If a cigarette tax comes my way without accompanying reform and offsetting tax cuts, I will veto it, period. Second, if we don't get income tax reform this way, we'll be looking for other ways to make it happen. Ultimately, getting South Carolina's economy going is about more than just paying for health care — it's about keeping South Carolina home to all of us.