Budget to Cut Income Taxes by $205 Million, Increase Cigarette Tax

Budget to Cut Income Taxes by $205 Million, Increase Cigarette Tax

GOVERNOR TO PROPOSE $98 MILLION IN NET TAX RELIEF, $107 MILLION TAX SWAP WITH CIGARETTE TAX INCREASE

In the latest preview of his upcoming Executive Budget, Governor Mark Sanford today called for $205 million in income tax relief for South Carolina, to be partially paid for through an increase in the state's cigarette tax.

By holding spending increases to population plus inflation, the governor's budget is able to set aside $98 million to be returned to taxpayers on an annual basis. Additionally, the budget proposes a cigarette tax increase of 30 cents per pack that would generate $107 million yearly. The budget will contain a recommendation that all of those dollars be returned in the form of a $205 million income tax cut. The governor said he will work with the legislature and business groups on a proposal to return those dollars to taxpayers, through some combination of business and personal income tax cuts.

"This proposal really boils down to two things, and that's bolstering South Carolina's economic health and improving individual South Carolinians' health," Gov. Sanford said. "We've said from day one that if we want to set a truly sustainable course with regard to state spending, we have to budget on a population plus inflation basis and return the excess to taxpayers. Doing this will mean a healthier state budget, as well as a more vibrant economy as people and businesses are able to invest more money in the private sector rather than growing government. In addition, I think this plan has a host of benefits when it comes to improving the quality of life for thousands of South Carolinians by impacting the cost of smoking, and therefore the rate of smoking. But to be clear, we continue to believe that the aggregate tax burden for South Carolinians is already high enough, and I would not accept a cigarette tax hike that came to my desk without a corresponding tax decrease like the one we're proposing."

Budget writers will have roughly $804 million new dollars available to spend when they return to Columbia in January. Gov. Sanford's Executive Budget recommends limiting spending increases to the population plus inflation rate of 5.5 percent, or roughly $399 million in new spending. Of the remaining $405 million, $98 million would go to tax relief and the $307 million would go toward shoring up long-term debt.

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