Taxes

Should Smokers Keep SCHIP Afloat?

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Congress seems set to approve legislation that would fund an expansion of the State Children's Health Insurance Program with a 61-cent-a-pack increase in the federal cigarette tax. President Bush has promised to veto the bill, which seems contrary to progressive principles as well as conservative anti-tax sentiment. Isn't the idea of a program aimed at helping people of modest means that it should be financed by people who are better off? As a group, smokers are less affluent than nonsmokers, and poor smokers spend a bigger chunk of their income on cigarettes than rich smokers do, facts that combine to make the cigarette tax highly regressive.

Even if smoking does not, on balance, save taxpayers money (which it probably does, once you take into account the savings from less health care in old age and fewer Social Security payments associated with smokers' shorter life spans), I've never seen any credible numbers suggesting that the current level of state and federal taxes fails to cover the external costs attributed to the habit. So higher cigarette taxes to pay for health care cannot reasonably be seen as a user fee or an insurance surcharge for people whose risks are higher. In any case, the smokers paying for SCHIP will not, by and large, be the children covered by it.

For a somewhat different perspective on the proposed tax hike, see anti-smoking activist Michael Siegel's comments. Siegel worries that tying SCHIP funding to cigarette tax revenue will discourage the federal government and the program's supporters from trying to reduce smoking rates.