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Funding Children’s Health Care Programs with Cigarette Tax Hikes

2 min readBy: Gerald Prante

The State of Oregon is seeking to fund a new children’s health care program, and debate is ensuing over how to fund it. The leading proposal has unfortunately become a common theme across the country as lawmakers are seeking to impose a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on a select group (smokers) so as to not lose the support of the political majority. From the Seattle Post:

Breaking ranks from many in the Oregon GOP, U.S. Republican Sen. Gordon Smith threw his support Wednesday to a Democratic plan to increase the state’s cigarette tax, in order to pay for a major expansion of children’s health insurance programs.

Smith, who is facing a potentially difficult 2008 re-election campaign in a state that’s been trending Democratic, stood shoulder to shoulder with Democratic Gov. Ted Kulongoski, who said he hoped Smith’s endorsement would sway other Republicans.

Democrats and Republicans alike have said they support expanding the children’s health care program, to cover the state’s estimated 117,000 uninsured children who come from lower-income working families. But most Republicans have insisted that the money to pay for such an expansion come not from the proposed 84.5-cent increase in the cigarette tax, but from existing revenue sources.

Though Democrats are in the majority in both chambers of the Legislature, they need support from at least five House Republicans before the cigarette tax proposal can pass that chamber; all revenue-raising measures need support from at least 36 members of the 60 member body, and Democrats hold a bare 31-29 majority. (Full Story)

There really is no justification for raising the cigarette tax to pay for this children’s health care program. If the program is worthwhile on its own, it should be funded by general revenue. Taxing cigarettes and funding a children’s health insurance program are totally separate, and there is absolutely no legitimate reason for why one should fund the other beyond the fact that cigarette tax hikes are easier sells politically than raising taxes on everyone.

If lawmakers view that the negative externalityAn externality, in economics terms, is a side effect or consequence of an activity that is not reflected in the cost of that activity, and not primarily borne by those directly involved in said activity. Externalities can be caused by either production or consumption of a good or service and can be positive or negative. associated with cigarette smoking is high enough to warrant a higher tax, that issue should be debated on its own. Cigarette taxes should never be raised just because the state needs some additional revenue. Why not tax light bulbs to raise additional revenue? Sound ridiculous? It’s just as crazy as raising cigarette taxes merely to fund a spending program when the only justification for a special tax on cigarettes in the first place is the perceived negative externality that exists from their consumption. Extending the logic used by the proponents of this plan, one would conclude that all of Oregon’s spending should be funded by cigarette taxes.