Even with a projected $1 billion budget gap looming, there are some items in South Carolina that are apparently “off the table” when it comes to taxation. Chief among them? Cigarettes.

South Carolina enjoys the lowest cigarette tax in the country at a paltry 7 cents per pack. Nope, that’s not a typo: 7 cents. The next lowest state is Missouri, with a 10 cent increase over South Carolina: 17 cents per pack. In contrast, the overall average tax by state is $1.38 per pack; my own state of Pennsylvania is not too far off, at $1.60 per pack. You can see all of the rankings through 2010 here (downloads as a pdf).

This week, the Senate voted to change that by increasing the tax by 50 cents, to 57 cents per pack. That still puts South Carolina comfortably at the bottom when it comes to taxing cigarettes (they’d be tied with Idaho for the 8th lowest cigarette tax) and would boost the state’s coffers by $136 million. Even more appealing? At least $125 million of the funds raised by cigarette tax would be matched by a ratio of 3-to-1 by the federal government. So it was no wonder that the Senate voted (again) to pass the tax by a margin of 41-1; if the vote survives, it would be the first increase in the tax since 1977.

However, declaring the tax a done deal is a bit much said. Gov. Sanford (R-SC) – yes, that Governor Sanford – has threatened to veto the cigarette tax. Sanford, who will leave office in 2011, has indicated through his spokesman that he won’t allow an increase because: “A cigarette tax does nothing to stimulate the economy or create jobs.”

True, it’s not a job creation bill. But when did that ever stop SC from trying to raise taxes before on say, porn? I don’t think the legislature is making any attempt to couch the tax hike as anything more than… a tax hike. But Sanford is planning to hold his ground, setting the stage for a veto battle.

To override a gubernatorial veto, the Senate and the House would have to muster at least a two-third vote. The initial House vote on the matter was 97-22 and the Senate vote was 41-1. However, word of a veto has reportedly caused some Republicans in the House to reconsider their initial vote, making what will happen next a bit unclear. The House was unable to block Sanford’s last cigarette tax veto two years ago.

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Kelly Erb is a tax attorney, tax writer and podcaster.


  1. Well, Governor Sanford is a twit — we all knew that. I guess he left more than his heart in Argentina. Last year I drove thru SC; now I know why, right at the border, there are roadside emporia whose billboards blare “Cigarettes”.
    With the Federal matching funds, this tax could eliminate almost 40% of the state’s projected deficit. It also would create a small but significant number of ex-smokers; I suppose that could be seen as productive., Guv!

  2. It is like most states….people want no taxes yet want all sorts of government services and they want the services to be VERY efficient and quick. It is comical.

    People in this country BEG our governments to cut spending yet when they do….and jobs are lost, money is taken away from people/schools, etc….we all complain

    It’s like….people don’t actually GET what being fiscal means

  3. Hey, I’ve followed Sanford since he was our Federal Representative in DC. I was administrative director to a presidential appointment at the time. Sanford is self-serving and flies in the face of common sense. Always has and always will. I am from SC. Still live here. We are SO ready for this man to be gone. It’s a sorry state of affairs when the Republican governor has been unable to get along with the Republican legistlature. Seriously. The man has rocks in his head and the state is very tired of him. We have a good old boy political machine that put the man in office because he was a staunch Rep. They are regretting that now. The state is for the cigarette tax. When Sanford is gone, we’ll push it through.

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