State Senate OKs 50-cent cigarette tax increase

COLUMBIA, S.C. (AP) — South Carolina's lowest-in-the-nation cigarette tax would increase by 50 cents under a bill that won key approval in the state Senate Wednesday.

It faces long odds in becoming law and sparing state Medicaid programs from deep cuts.

The 26-16 second reading vote came after more than five hours of debate as tax pledge signers repeatedly tried to kill the bill and supporters added an amendment that likely will kill it if Gov. Mark Sanford follows through on a veto threat.

South Carolina's 7 cent-per-pack tax hasn't been increased since 1977 when a pack cost an average of 49 cents.

The legislation calls for it to rise to 57 cents a pack, generating nearly $120 million for Medicaid programs, and $5 million each for efforts to curb smoking and cancer research. But it also sets aside $2.8 million for marketing agriculture products and $3.5 million for rural infrastructure development efforts along I-95, an area known for low income residents and underperforming schools.

"They get their money before a nickel goes to health care," said Senate President Pro Tem Glenn McConnell, who said the bill won't survive a veto. "When it becomes a goody bag for some new spending, it's in trouble. The trimmings doomed it," the Charleston Republican said.

Sanford has vowed to veto any cigarette tax proposal that doesn't come with a matching tax decrease. His allies repeatedly tried to use the tax to offset a variety of taxes: income, homes, business, capital gains and even personal property like boats.

All those measures failed — but they consistently yielded enough votes to sustain a veto.

Senate Majority Leader Harvey Peeler said he'd warned supporters to craft something that could muster the votes to overcome a veto, but they didn't. Senators should have lowered the tax levy to 30 cents a pack, for instance, the Gaffney Republican said. "That's the silver bullet I think," Peeler said.

The Senate voted before heading off for an extended Easter break and won't take up the measure for a third and final reading until April 13, just two days before a big tea party and tax protest rally at the Statehouse.

Approval would send the measure back to the House. Last year, the lower chamber voted 97-22 for a tobacco 50 cent tax-hike bill that called for the creation of a new health insurance program for the state's working poor.

But the House measure was approved long before President Barack Obama signed into law a federal health care bill that would enlarge Medicaid programs and expand federal tax breaks for private health insurance.

Legislators are scrambling to find money to cover Medicaid programs that the state can't pay for beginning in July 2011.

The Senate's version sets cash aside for a year to head off drastic cuts in Medicaid.

For now, federal bailout money for the state is filling holes in a recession-wrecked state budget, particularly in health care programs for the elderly, poor and disabled. Without the cash next year and without a cigarette tax increase, supporters of the bill said the state would lose nearly $500 million in programs that would affect everything from nursing homes to meals on wheels.

Without it, "I'd hate to even start to think about the impact it is going to have on those services," said state Sen. Thomas Alexander, a Walhalla Republican.

State Sen. Larry Martin, a Pickens Republican, said the money could help the state get to the other side of the recession.

"But if we don't do this — there's not an almost or a possibility — it's a certainty that there's going to be some substantial reduction in the services provided by Medicaid in this state," Martin said.

Columbia, SC - Copyright 2010 The Associated Press.