Tax increase may be stubbed out

COLUMBIA — South Carolina smokers probably won't have to pay an extra 50 cents for a pack of cigarettes this year, thanks to a legislative battle that's broken out in the session's final days.

And because of that same conflict, low-income workers probably won't get help this year paying for health insurance.

"The cigarette tax proposals may be delayed until January with no clear-cut agreement over how to spend the money," said Sen. Larry Grooms, R-Bonneau. "It's a straight-up tax increase."

A decision Thursday by the Senate Finance Committee opens up a major fight on the Senate floor that likely won't be resolved with only six legislative days left before the anticipated summer adjournment.

Grooms was one of five senators on the committee who voted against a plan to raise the state's 7-cents-a-pack tax by 50 cents as of July 1. The proposal, which was approved in a 16-5 vote, calls for putting the $147 million the tax increase is estimated to generate annually into a bank account for at least a year. That would give Congress time to decide what to do about President Barack Obama's plan for universal health care.

The change could spell the end for the bill, which will be a tough sell in the GOP-controlled Legislature. Republican Gov. Mark Sanford already has promised to veto any tax increase that does not come with a corresponding decrease.

House Speaker Bobby Harrell, R-Charleston, authored the original bill that would have increased the tax and used the bulk of the money to provide tax credits to small businesses as an incentive for them to purchase private health-care coverage for their lower-income workers.

The new plan opens up the potential for the Legislature to decide to raise the tax and use the money for any number of reasons, Harrell said. The "tax now, wait and see method" is dangerous, he said.

"I think the committee's decision to stockpile the money has put getting the bill passed this session in serious doubt," Harrell said. "I don't know very many people in the House who want to grow government with this money."

Harrell's plan would have set aside $5 million for smoking cessation and about $3 million for the promotion of South Carolina crops. But as part of the Senate committee's revision, that money is wiped out and $5 million would be sent to Hollings Cancer Center for tobacco-related cancer research. The Senate budget calls for $2 million in general funds to be used for smoking cessation.

Despite the uphill climb, some legislators remain optimistic about the bill's chances this year.

Senate Finance Committee Chairman Hugh Leatherman said he isn't certain the plan is doomed this year, given the strong support expressed in the committee vote. Many committee members, chiefly Senate Minority Leader John Land of Manning, said it was wise to put the money aside so the state has resources on hand if Congress demands matching money for a new federal health care plan.

"I think it has a great chance of passing this year," said Leatherman, R-Florence.

South Carolina has not increased the cigarette tax since 1977. It is the lowest in the nation, which convenience store owners testify is a boon, especially to stores along the North Carolina and Georgia borders.

Georgia taxes each pack of cigarettes at 37 cents. The rate in North Carolina is 35 cents.

The federal government raised its portion of the tax by 62 cents on March 31, increasing it to $1.01 a pack, which provides money that is used to extend health care coverage to 4 million uninsured children.

Michael Fields, executive director of the South Carolina Petroleum Marketers Association, said raising the cigarette tax to a rate higher than neighboring states puts South Carolina retailers in a bad spot.

"To take us from the lowest in the country to the highest in the Southeast during these economic times is bad news, not only for convenience store owners but for the people who choose to smoke," Fields said. "That's frustrating."

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