Cigarette tax increase to fund S-CHIP expansion would hurt exactly the constituency
that was promised “you will not see a single dime of your taxes go up!”

WASHINGTON, D.C. – The 111th Congress is less than a week old, and already the first tax increase has been
put on the table. As the Democratic leadership is indicating, the House of Representatives may vote on a 156
percent increase in the tax on cigarettes to fund the expansion of the State Children’s Health Insurance
Program (S-CHIP) as early as next week.

Lofty promises were made during the 2008 campaign that nobody making less than $200,000 would see
their taxes go up in the 111th Congress. However it is clear that a tobacco tax increase stands to hurt the
very constituency that was promised no new taxes. Industry figures indicate that more than half of all
smokers qualify as “working poor”, with one in four living below the poverty line.

“Congressional Democrats must not think very highly of President-elect Obama, because they must
assume that he will sign into law what he solemnly promised he would not let happen: a tax increase
on middle- and lower-income Americans,” said Grover Norquist, president of Americans for Tax Reform.
“It is quite brazen to want to turn the President-elect’s campaign promises into empty rhetoric, in fact,
a ruse in the eyes of the American people. Yet that is what will likely happen in order to fund the
expansion of an already flawed program.”

Taxpayer advocates point to the absurd rationale of discouraging a behavior on the one hand, while at the
same time relying on its continuance as a revenue stream. With cigarette sales already in steady decline, a
recent Heritage Foundation study has found that over 22 million new smokers would need to take up the
habit to fund the planned S-CHIP expansion.

“Given the recent trends, 22 million people will not start smoking, but rather, more will quit if the tax
rate goes up. You don’t have to be a rocket scientist to figure out what will happen when revenues
from the tobacco tax hike dry up. The cigarette tax increase is merely a placeholder for the next tax
increase,” continued Norquist. “Rather than making the President-elect renege on his word even before
he takes office, Congress should look to free-market health care alternatives.”