By Scott Miller
Staff Writer

Taxpayers could cut their income tax rate in half by choosing to forego deductions if lawmakers approve Gov. Mark Sanford’s bid to create a flat tax rate.

To offset the loss of revenue from the tax cut, Sanford said Wednesday he wants to increase the cigarette tax from 7 cents per pack to 37 cents, a revenue boost of around $107 million.

At 7 cents a pack, South Carolina has the lowest cigarette tax in the country, according to the Federation of Tax Administrators. New Jersey has the highest at $2.57. In the Southeast, Georgia charges 37 cents per pack, Florida 33.9 cents and North Carolina 35 cents.

On Sanford’s income tax proposal, South Carolinians could choose to pay a 7% rate and take deductions or pay a 3.4% rate and lose deductions.

“If you’re paying less under the current system, you can continue to do that,” said Joel Sawyer, a spokesman for Sanford.

Currently, the state has several tax brackets with tax rates ranging from 2.5% to 7%, varying by income. Sanford’s proposals would create a flat rate at 7% with the optional tax cut. The move would not change the corporate income tax rate.

The change should not create higher tax bills for low-income people, Sawyer said, because nearly everyone already falls within the 7% tax bracket, which applies to anyone earning at least $12,850 a year.

“This proposal is ultimately about improving South Carolina’s competitive position when it comes to taxes and about improving the health of individual South Carolinians,” Sanford said. “Whether you’re looking nationally or internationally, the bottom line is that marginal rates matter in terms of bringing jobs and investment to our state.”

Only eight states have a higher income tax rate than South Carolina, according to figures from the Federation of Tax Administration. Those states use tax brackets so the higher rates only apply to higher incomes. Iowa, for example, has one of the highest tax rates at 8.98%, but only people earning more than $60,436 pay at that rate.

Six states have flat tax rates, ranging from 3% in Illinois to 5.3% in Massachusetts, according to the Federation of Tax Administrators.