More Than 40 Groups Call on Congress to Reject Tax Increase to Fund S-Chip Expansion

January 6, 2009                                        

Dear Members of Congress:

 

On behalf of the millions of taxpayers, small businesses, families, senior citizens and shareholders represented by our respective organizations, we strongly urge you to reject any reauthorization or expansion of the State Children’s Health Insurance Program (S-CHIP) funded through a tobacco tax increase.      

Created in 1997, S-CHIP stands as a misguided attempt to address health insurance coverage for children. Falling just short of being a full-blown entitlement program, S-CHIP is seriously flawed, crowds out private health insurance, and has far outgrown its original scope and purpose. However, an attempt to not only reauthorize, but significantly expand coverage of S-CHIP, which was rightfully vetoed by President Bush in 2007, is expected to be rekindled in the 111^th Congress.

 

Rather than taking further steps to expand the program into a universal entitlement, we the undersigned, urge you to seek free market reforms to empower low-income working families and strengthen access to private health care coverage. Given that seventy percent of the uninsured children in this country already qualify for Medicaid or S-CHIP, an expansion of the program is the wrong direction.        

 

As the reauthorization debate heats up again, we urge you to stand strong against all efforts to raise the tobacco tax as a funding mechanism. Taxpayers in many states are already struggling to make ends meet, and are already saddled with higher taxes to fund state health care program expansions. Congress should lead the way toward consumer-driven health care rather than replicating misguided tax increase strategies to expand misguided spending priorities.

 

A higher tax rate will not only scapegoat a segment of the American population for using a legal product, but will also hurt small businesses which often lean on tobacco sales to stay in business. As small businesses continue to be the engine of job creation in the U.S., raising the tax on tobacco would throw a wrench into the gears of economic growth, at a time when this is the last thing America needs.

 

While proponents of such proposals follow the peculiar and questionable rationale to discourage certain behaviors while relying on their continuance and even expansion as a source of revenue, the absurdity of such reasoning is striking.  Tobacco use is already in decline and in order to avoid paying higher tobacco taxes, consumers will turn to the Internet or the black market. With an increase in illegal activities comes an increase in the cost of enforcing compliance. 

 

Funding an expansion of children’s health insurance on an already-declining revenue stream that the legislation seeks to further decrease is irresponsible and dangerous policy. Ultimately, the tobacco tax serves as a placeholder for the next tax increase that will likely be required to sustain funding levels once revenues from the tobacco tax dry up. The negative ripple effect of this will not only be felt at the federal level, but at the state level, too, with many states relying heavily on tobacco tax revenues.

 

Ultimately, raising the tobacco tax to fund S-CHIP creates a lose-lose situation, and it is for these reasons we, the undersigned, urge you to work and vote against raising the federal excise tax on tobacco for reauthorization of S-CHIP. 

 

Sincerely,

 

60 Plus Association, Jim Martin, president

Alliance for Worker Freedom, Brian Johnson, executive director

American Conservative Union, David Keene, president

American Family Business Institute, Dick Patten, president

American Future Fund, Nicole Schlinger, president

American Legislative Exchange Council, Jonathan P. Williams, director, Tax and Fiscal Policy Task Force

American Shareholders Association, Ryan Ellis, executive director

Americans for Tax Reform, Grover G. Norquist, president

Americans for the Preservation of Liberty, Mark Chmura, executive director

Arizona Free Enterprise Club, Steve Voeller, president

Association of American Physicians and Surgeons, Mark Kellen, president

Center for Fiscal Accountability, Sandra Fabry, executive director

Center for Individual Freedom, Jeffrey Mazzella, president

Citizen Outreach, Chuck Muth, president

Citizens’ Alliance for Responsible Energy, Marita Noon, executive director

Citizens for Limited Taxation, Chip Faulkner, associate direcor

Club for Growth, Pat Toomey, president

Commonwealth Foundation, Matt Brouillette, president

Competitive Enterprise Institute, Sam Kazman, general counsel

Council for Citizens Against Government Waste, Tom Schatz, president

Evergreen Freedom Foundation, Bob Williams, president

FreedomWorks, Matt Kibbe, president

Howard Jarvis Taxpayers Association, Jon Coupal, president

Illinois Alliance for Growth, Greg Blankenship, president

Institute for Liberty, Andrew Langer, president

Let Freedom Ring, Colin Hanna, president

Maryland Taxpayers Association, Inc., Dee Hodges, chairman

National Center for Public Policy Research, Amy Ridenour, president

National Tax Limitation Committee, Lew Uhler, president

National Taxpayers Union, Duane Parde, president

New Jersey Taxpayers’ Association, Jerry Cantrell, president

Property Rights Alliance, Kelsey Zahourek, executive director

Reason, Adrian Moore, vice president

RightMarch.com, Dr. William Greene, president
Route 3 Benefits, Ralph Weber, president and CEO
Small Business and Entrepreneurship Council, Karen Kerrigan, president and CEO
Tennessee Tax Revolt, Ben Cunningham
Texans for Fiscal Responsibility, Michael Quinn Sullivan, president and CEO
Don Racheter, founder and moderator, Iowa Wednesday Group