Gov. Sanford on cig tax consequences

Columbia, S.C. – April 22, 2010 – Gov. Mark Sanford today joined Dr. Russell Sobel in North Augusta to discuss pending cigarette tax legislation and efforts to improve business soil conditions across South Carolina.

“Dr. Sobel’s visit to South Carolina comes at a crucial moment during this legislative session, inasmuch as legislators are considering raising taxes on cigarettes by 50 cents per pack,” Gov. Sanford said. “While we have consistently agreed that South Carolina should not have the lowest cigarette tax in the nation, we have said that when raising one tax we should cut another by an equal amount so we don’t raise the overall tax burden on working South Carolinians. In this case, it would mean a $1.3 billion tax hike over the next decade – something we think unwise for the following reasons:

“One, not all taxes are created equal. Cigarette tax hikes do not stimulate the economy, grow jobs or improve our state’s soil conditions. We’ve consistently advocated for increasing the cigarette tax while matching it with substantial tax relief that expands liberty and jumpstarts our state’s economy – anything from an individual income tax cut, an optional flat tax, or a cut to the tax rates on job-creating businesses across South Carolina.

“Two, this billion dollar tax increase represents a real danger to the state’s long-term economic prospects as it transfers money from the wallets of taxpayers and into government coffers in Columbia. Government already costs South Carolinians almost 140 percent the U.S. average, and government spending accounts for over 40 percent of the state’s economy, leaving less than 60 percent for the private sector. Indeed, we have the 10th largest government sector of any state in the country, and the tax increase being considered would take us even further down that path.

“Three, even a 50 cent cigarette tax increase is only a short term band aid. Even with the roughly $136 million in new government tax revenues, state Medicaid funding will need an additional $239 million to fill its shortfall already next year – and it’s not unlikely that we’ll once again be faced with the prospects of increasing taxes on South Carolinians even further.

“Finally, Dr. Sobel’s extensive research demonstrates how counterproductive it is for states like South Carolina to increase taxes and dampen competitiveness. Conversely, his research points to the benefits of broad based tax relief that fuels economic growth by encouraging entrepreneurship and fostering job creation – and for all these reasons, I’d urge the legislature not to move forward with this tax increase. More importantly, I’d urge each and every South Carolinian who believes in this larger notion of not spending our way out of a recession and instead improving soil conditions and providing tax relief to grow our state’s economy to contact their legislators and make their voices heard.”

Dr. Sobel, a nationally recognized economist and expert on free market policies at the state level, is the James Clark Coffman Distinguished Chair in Entrepreneurial Studies at the University of West Virginia. Dr. Sobel’s recent study, Unleashing Capitalism, takes a comprehensive look at the roadblocks to economic prosperity in South Carolina and offers prescriptions to not only overcome these challenges, but also improve our state’s competitiveness with other states and indeed nations across the globe.