President Bush Vetoes Tax Increase on Politically Expedient Group

In a rare use of the veto pen by the Bush administration that has already sent labels of “heartless” his way from Senate Majority Leader Harry Reid, sound tax policy has been preserved. Regardless of whether or not SCHIP, the State Children’s Health Insurance Program, should be expanded, choosing one group of Americans to fund it — smokers — is terrible tax policy and has no business in a free society.

If members of Congress want to expand SCHIP, they should do so via an increase in a broad-based tax like the federal income tax. Tobacco taxes should not be increased solely for the purposes of raising revenue. The only special tax levied on cigarettes should be a function of the negative externality they impose on society and nothing more. No specific product should be subject to a higher or lower tax just because some special interest wants it or merely because it is politically expedient. By that logic, we could raise revenue by having politicians arbitrarily pick anything.

How about imposing an excise tax on campaign contributions to fund SCHIP? Just as politicians claim that they want to paternalistically reduce the number of smokers and therefore we should raise the tax, they also constantly pay lip service to reducing the amount of money in politics. We say to them: Put your money where your mouth is. Just as you want to raise cigarette taxes to reduce smoking, let’s impose a significant tax on political donations to limit the amount of money in politics (free-speech issues aside).

And for Nevada Senator Harry Reid to call this heartless, if he truly believes in paternalistic policies like raising the cigarette tax to reduce smoking and funding SCHIP, then we could easily extend that same logic to another vice — gambling. How about a federal tax on slot machines to reduce gambling and pay for SCHIP? Somehow we doubt Sen. Reid would be happy with the damage such a policy would do to the Nevada economy, just as many in the South aren’t happy with the choice of a tobacco tax hike.