Sanford, Bauer clash on tax increase

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Bauer, as presiding officer of the Senate, is empowered to interpret Senate rules, authority used last year by then-Lt. Gov. Bob Peeler to block a tobacco tax hike. The Senate can override such rulings.

The two Republicans sidestepped any head-on confrontation over tax issues.

"This isn't a tax increase. In the net it is a substantial tax decrease over time," Sanford said at a gathering of small-business officials who support the governor's plan.

Bauer said he's open to compromise on a plan that balances tax cuts in one area against tax increases in another area.

But he signaled that plans competing with the governor's proposal are gaining currency in the Legislature.

"I don't always support a tax shift, but things that intrigue me are things like raising the sales tax to do away with the property tax," Bauer said.

Bauer told a Statehouse gathering of auto dealership employees and anti-tax advocates that "Rather than raising taxes, we should tighten our belts and look for programs we don't need."

Meanwhile, the Senate Finance Committee's plan to remove sales tax exemptions and boost tobacco taxes to increase spending on schools and health care was floundering Tuesday.

Senate Finance Committee Chairman Hugh Leatherman said he would fight for additional money he said is needed to fully fund Medicaid health services for the poor and for public schools.

"I am totally committed to funding Medicaid with recurring monies, and I'm committed to putting some monies into education, into the classrooms," he said.

"The way we generate those funds is not as much a concern to me as making sure we do it."

A key feature of the Finance Committee's plan to raise $322 million would be to raise the cap on sales taxes on the purchase of vehicles from $300 to $2,500.

Auto dealers have lobbied heavily in opposition to changing the sales tax exemption, which has been in place since 1984.

A 53-cent increase in the tax on a pack of cigarettes would raise $171 million of additional revenue for Medicaid.

Gov. Mark Sanford has offered to support the cigarette tax increase in exchange for legislative support for his plan to reduce the top state income tax rate to 5 percent from the current 7 percent.

Sanford said Tuesday that Bauer's remarks did not concern his tax plan.

"I have all along signaled a willingness to trade off different taxes. I think this is the ultimate referendum on the theme of tax reform. Because if you can't trade off a cigarette tax that would enable you to collect $400 million in federal funds from Washington in exchange for a cut in income tax, I don't know how you pull off any other tax change."

The governor said he had not discussed Bauer's stance with the lieutenant governor because "we don't see that as a threat in any way to what we're talking about."

Sanford said that if the Legislature chooses not to enact his plan, "then we've just said goodbye to the overall theme of tax reform."

Two other tax plans are circulating among lawmakers, and receiving some support.

Sen. David Thomas, R-Fountain Inn, plans to propose increasing the state sales tax to 7 cents from the current 5 cents per dollar, and using the approximately $1 billion of new revenue to replace property taxes on homes and vehicles. Thomas said it would result in a net windfall for school districts, especially the poor, rural districts, and the amount of revenue would rise annually with inflation and a growing state economy.

Meanwhile, Sen. Tommy Moore, D-Clearwater, plans to propose a 2-cent sales tax increase and the 53-cent cigarette tax increase and use the lion's share of the new money for education ($409 million) and health care ($262 million). Moore's plan also calls for an income tax reduction, to 5 percent from 7 percent, on small-business owners, and eliminating taxes on the first $15,000 of personal income.

"It's one thing to say no tax increase, but when you are just shifting that burden to local taxpayers, that's not fair," Moore said.

Moore said his plan "is not a rebuke of the Senate Finance Committee report," but instead was an acknowledgment that the committee's plan was having some trouble garnering support in the full Senate.

Representatives of small businesses and business chamber groups gathered with Sanford to speak in favor of the plan Tuesday, saying it would equalize the tax on businesses and also help reduce business health care costs by addressing Medicaid needs.

Wallace Brown, executive director of the Richland County Health Care Association, Inc. of Columbia and one of the dozens of officials who attended Tuesday's press conference, said he likes Sanford's proposal because it cuts taxes and helps Medicaid.

"He has a plan that will help the state's revenue and at the same time help increase revenue for individual homes and stabilize the Medicaid program for over a half million people," he said.

"We're focused on the Senate right now and then we'll come back to the House and see what happens," he said.

The House passed a budget that sets per-pupil education spending at $1,643, compared with the Senate Finance Committee's figure of $1,904. The State Department of Education estimates as many as 6,000 public school teachers might lose their jobs if the House spending level is adopted.

The House also did not include the cigarette tax increase, a measure vigorous opposed by House Speaker David Wilkins, R-Greenville, and House Ways and Means Committee Chairman Bobby Harrell, R-Charleston.