Wednesday, July 25, 2007

Tobacco is Evil & Please Smoke More

That's the message Congress is sending as it tries to fund an expansion of children's health care with revenues from dramatically higher tobacco taxes, while it simultaneously considers legislation to significantly reduce smoking:

To pay for an expansion of the State Children’s Health Insurance Program (SCHIP), a Finance Committee draft bill would increase cigarette taxes to $1 per pack, raising an estimated $35.7 billion in new revenue.

Another bill, sponsored by Sen. Edward M. Kennedy, D-Mass., would have the Food and Drug Administration regulate tobacco with the help of advertising controls, new warnings and nicotine reductions, all designed to help people quit smoking or stop them from starting. Kennedy’s bill (S 625) is due to be marked up Wednesday by the Health, Education, Labor and Pensions Committee.

In scoring the Finance tax proposal, the Congressional Budget Office factored in that a few million smokers might quit puffing because of the increased cost. But CBO analysts didn’t take into account the effect that new FDA regulations might have on the tax package.

So supporters of the SCHIP program may be put in the uncomfortable position of having to depend on committed smokers not heeding new FDA warnings.
The S-CHIP expansion would expand eligibility to the 'poorest' 60 percent of all children, including parents earning as much as $82,000 per year. To pay for that expansion using tobacco taxes, the federal government will need 22 million new smokers over the next ten years -- a goal just slightly at odds with the ongoing attempt to reduce smoking. It also ignores the fact that cigarette sales have fallen 20 percent over the last 10 years.

As the Heritage Foundation points out:

Funding the expansion of a government health program through a tax on a toxic product with a declining revenue stream is not only paradoxical but also fiscally irresponsible. It is not a reliable source of continued funding. Even with the tobacco tax hike, additional revenues, most likely from other tax increases, will be necessary to pay for SCHIP expansion.

Isn't there a better approach?

Update -- Here is a better approach:

Jim DeMint: I'll tell you simply and then we'll get out more details and talking points later. The federal government spends a lot of money helping to buy private health insurance for some workers. We do that through the deduction that employers get. But, if your employer doesn't offer it, you don't get it. Over the next 10 years, this is an incredible number -- we're going to spend as a nation, $3.7 trillion dollars through our tax code -- and some people don't like to say that we spend through the tax code, but we pay for the insurance for people who get it through their employers. People who buy it on their own don't get anything.

If we discontinued using the tax code to pay for health insurance and took that $3.7 trillion dollars and spread it out across all Americans, we could give every American family a $5000 a year health care tax voucher that they could use to buy insurance. Every individual, every single person, would get $2000. It would be budget neutral. No effect on the deficit, no new spending...but the choice is, do we want Hillarycare, which we're headed towards in a hurry, and the Democrats are going to try to expand the child health care program in the next couple of weeks by tens of billions of dollars or are we going to figure out how to get everyone a basic insurance package? One way or the other, people are going to have to be covered. We don't have to do a mandate, but we can provide every American family, without spending any more money, $5000 to buy health insurance...

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