Senate Finance Votes for Higher Taxes
SCHIP/Tobacco Tax Increase Passes Out of Senate Finance Committee

Washington, D.C. – Today the U.S. Senate Committee on Finance approved a bill to expand the State Children’s Health Insurance Program by raising federal excise taxes on tobacco products.  By a vote of 17 to 4, Senators reported the legislation out of committee.  Senators Lott (R-MS), Kyl (R-AZ), Bunning (R-KY) and Ensign (R-NV) cast “no” votes. 

The movement to raise the federal tobacco tax relies on the argument that the rate has not been increased in several years.  However, on the state level, taxpayers have been faced with a consistent and substantial tax increases on tobacco products since 2000.  According to analysis by the American Shareholders Association, over the past seven years, the average state cigarette tax rate has more than doubled from 42 cents to 92 cents per pack.

“I applaud Senators Lott, Kyl, Bunning, and Ensign for having the courage to stand on the side of taxpayers, despite the warm, fuzzy, and seriously flawed rhetoric of voting for children’s health care,” said taxpayer advocate Grover Norquist, president of Americans for Tax Reform. “These four Senators saw through the smoke and mirrors to a broken program that this legislation would set on the path to becoming a universal entitlement program for wealthier children and even childless adults.” 

The legislation has raised concerns regarding expanding an ineffective health care program to cover wealthier children using a declining revenue source.   Although states have doubled their tobacco tax rates, tax collections have “only” increased 69 percent.States that have raised their tobacco taxes in recent years are facing diminishing revenue streams due to smuggling and black market activity.  A federal tax increase would continue to erode the state and federal tax bases by stimulating black market activity. 

“Raising taxes is never healthy,” continued Norquist. “I strongly urge Congress to embrace consumer driven health care solutions to empower low-income working families and strengthen access to private health care coverage.”