Funding S-CHIP with Federal Cigarette Tax Increase is Poor Tax Policy
January 15, 2009
The House of Representatives yesterday voted 289-139 to pass a 156% increase in the federal excise tax on cigarettes (taking it from 39 cents per pack to $1.00, not counting state taxes which average over $1 a pack). The estimated $33 billion tax hike (over 4-1/2 years) would be earmarked to expand the State Children’s Health Insurance Program (S-CHIP). The bill is almost identical to a previous version that was vetoed in the summer of 2007, and it will soon go to the Senate.
In Tax Foundation Fiscal Fact No. 158, Tax Foundation experts Gerald Prante and Joseph Henchman argue that a politically popular and expensive program should never be funded by a small, low-income, politically unpopular minority like cigarette smokers.