Sin Tax on the Rise: Cigarettes to Shoulder S-CHIP

Yesterday, President Obama signed into law legislation reauthorizing and expanding the State Children’s Health Insurance Program or S-CHIP, which was set to expire in March 2009.

Former President George W. Bush had previously vetoed two similar bills.

The measure increases federal tax on cigarettes by almost 62 cents a pack, to $1.01 a pack. This increase is expected to raise the $32.8 billion needed to pay for S-CHIP over the next four years.

Health and anti-smoking advocates hail the legislation as a victory for public health. The American Lung Association in New York put out this statement:

“Here in New York, the federal tobacco tax increase will prevent 77,400 youth from starting to smoke, help 41,300 adult smokers to quit and prevent over 35,000 smoking-related deaths.” See “CHIP a Win-Win for New York Children’s Health.”

And, the S-CHIP issue is not new. It’s been debated for years. See American Cancer Society’s Dr. Len Lichtenwold’s Cancer Blog post of 10/25/2007, “SCHIP, Children’s Health, And the Tobacco Tax.”

Still, the measure has its opponents. The Washington, DC-based think tank The Tax Foundation opposes it, arguing that “a politically popular and expensive program should never be funded by a small, low-income, politically unpopular minority like cigarette smokers.”

In its policy report, “Funding S-CHIP with Federal Cigarette Tax Increase is Poor Tax Policy,” The Tax Foundation asserts that higher cigarette taxes are “the most anti-poor method of funding S-CHIP.” It also argues “higher cigarette taxes encourage smuggling and associated crime,” and that “common arguments for cigarette tax increases don’t pan out.”

The Tax Foundation goes on to argue that opponents of smoking should advocate a total ban on tobacco rather than to promote a tax increase.

The anti-tax organization, Americans for Tax Reform, which is headed up by co-author of the 1994 Republican “Contract with America,” son of a tax assessor, and long-time opponent of taxes (some unresolved Oedepal issues here?), Grover Norquist, also opposed the bill.

Senator John McCain and thirty-three other senate Republicans voted against the bill.

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