Governor proposes optional flat income tax rate, cigarette tax hike

GREER, S.C. (AP) - South Carolina Gov. Mark Sanford on Wednesday again called for a 30-cent per pack increase on cigarettes and said he wants to use the money to cut income taxes for most of the state's wage earners.

But this time, the Republican governor wants to give people a choice: either pay taxes at the current rate of 7 percent and take eligible deductions, or pay a flat tax of 3.4 percent.

Increasing South Carolina's lowest-in-the-nation cigarette tax to 37 cents per pack would pay for the estimated $107 million in tax relief needed to pay for the governor's plan, Sanford said. Actual tax savings would vary per filer, but Sanford said he believes his plan would especially help middle-income residents who rent homes and don't have much to deduct.

The governor has pushed for income tax cuts since first taking office in 2003, arguing it would stimulate the economy. Critics took issue with the latest plan.

South Carolina Fair Share director John Ruoff said cutting income taxes for higher wage earners during an economic downturn ''makes absolutely no sense whatsoever.'' He also argued cigarette taxes should have no relation to income taxes.

''To tax low-income and working people more on cigarettes just so folks in the upper-income tax bracket can pay less is simply an outrage,'' he said.

The Legislature earlier this year eliminated the bottom income tax rate, saving every filer about $65. Many lawmakers argued money from increased cigarette taxes should go toward health care.