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Tobacco taxes may fund children’s health insurance
The nation’s 45 million smokers will probably help pay for the spending increase that Democrats want for children’s health insurance, say analysts familiar with deliberations on Capitol Hill.
Democratic lawmakers will push for $50 billion in new funding for the State Children’s Health Insurance Program (SCHIP) over the next five years. To pay for that increase, they must find new sources of revenue or cut existing programs.
Powerful trade groups representing doctors, hospitals and insurers have united around the idea of taxing tobacco. Democratic leaders have not said to what extent they will agree.
Still, the question now is not whether the tobacco tax will go up — but how much it will go up, said Ron Pollack, executive director of Families USA, an advocacy group that promotes universal health insurance.
“I’ve every reason to believe an increase in the tobacco tax will be part of the way expanded health insurance for children is paid for,” Mr. Pollack said.
He said his assessment was based on “frequent and relatively recent conversations” with the committees that have jurisdiction over SCHIP. Democrats from the House and the Senate are expected to announce their respective SCHIP proposals soon.
The federal tax on tobacco is 39 cents per pack, and it generated about $7.2 billion in 2005. The money goes into the general fund of the U.S. Treasury.
States also tax cigarettes. The rates range from $2.58 a pack in New Jersey to 7 cents a pack in South Carolina.
Tobacco companies oppose another tax increase on their product, but it’s not clear whether the industry has enough clout to fend this one off. The ban on unlimited contributions to the political parties, called soft money, has resulted in a significant drop-off in campaign contributions from the industry.
The Center for Responsive Politics reports that total campaign contributions from the tobacco industry fell from $9.2 million in the 2002 election cycle to $3.5 million in last year’s cycle. The center also ranks industries when it comes to campaign contributions; since 1996, tobacco has fallen from 26th in the center’s rankings to 62nd.
Most of the industry’s contributions in recent elections — about three-quarters — have gone to Republicans.
Bill Phelps, spokesman for Philip Morris USA, the nation’s largest tobacco company, said tax increases already have led to an 80 percent increase in the cost of a pack of cigarettes since 1999. The average cost of a pack is $4.13, though the costs vary dramatically from state to state.
“We feel this trend is unfair to adult smokers as well as to tobacco retailers,” Mr. Phelps said.
But a tax increase on cigarettes would have benefits, supporters of a tobacco tax increase said.
By Mangosuthu Buthelezi
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