McMaster opposes Rex's cigarettes plan

A leading Republican candidate for governor said Monday he would not support raising South Carolina's cigarette tax - the nation's lowest - under any conditions.

Attorney General Henry McMaster, spurred by a weekend of back-and-forth discussion on the issue with Democratic gubernatorial candidate Jim Rex, said Monday he would not support raising the tax, spokesman Rob Godfrey said.

Rex has proposed raising the tax by $1.24 a pack to the national average, using the more than $200 million raised to pay for health care and to avoid requiring teachers to take a week of unpaid leave.

The two men have agreed to debate the issue.

The cigarette tax is an issue in the governor's race. Lawmakers passed a tax hike in 2008 only to have it vetoed by Republican Gov. Mark Sanford. Lawmakers fell short of the two-thirds support needed to override that veto.

About three-quarters of state residents support raising the tax to $1 a pack, from its current 7 cents a pack, according to a 2008 survey by the Republican-leaning polling firm Public Opinion Strategies. The poll was conducted for the S.C. Tobacco Collaborative, a coalition of nonprofit and public health groups that support raising the cigarette tax to cut smoking rates.

Sanford has said he would support a cigarette tax increase if it included an equal tax cut somewhere else in the budget. But Godfrey said McMaster opposes any cigarette tax increase.

"Henry McMaster is not raising taxes under any circumstances," Godfrey said, noting McMaster had signed a national anti-tax pledge. "It's a good way to make a bad economy worse."

Rex spokesman Zeke Stokes said raising the cigarette tax could provide a boost to the state's health care industry, particularly rural hospitals struggling to stay open amid state budget cuts.

The federal government would match every dollar the state puts into health care with up to four dollars, Stokes said.

"We're leaving a lot of money on the table," Stokes said, estimating the federal match at from $500 million to $700 million. "An infusion of cash could help (the health care industry). Jobs are a huge, huge part of this."

In a news release Saturday, Rex noted McMaster has accepted $10,500 in campaign contributions from two tobacco companies.

McMaster thinks the cigarette tax debate points out a fundamental difference between Republicans and Democrats, his spokesman said.

"Dr. Rex wants to raise taxes to fund government spending," Godfrey said. "Henry McMaster wants to cut taxes to create prosperity."

McMaster has said comprehensive tax reform is a key part of improving the state's economy, but Godfrey said the no-tax pledge applies to tax reform as well. That means tax reform could not include rescinding any of the state's sales tax exemptions - for twine, newsprint, certain prescription drugs and other items. Those exemptions are worth $2.7 billion a year, according to the Board of Economic Advisers.

Lawmakers have asked a state panel to study the state's tax code and suggest ways to make the system fairer and more stable. Those recommendations are expected later this year.

Stokes said Rex is not proposing to raise property, income or business taxes. He also criticized McMaster, saying he has provided no specifics for his jobs plan.

"Calling us liberals is not an economic plan," Stokes said. "Saying we have to cut taxes to create jobs is not an economic plan."