Cigarette taxes may pay for children’s healthcare, to conservatives’ chagrin

Many senators — including the GOP leader — anticipate bipartisan support for a proposed cigarette-tax hike to help pay for expanding children’s health insurance coverage. But don’t tell that to conservatives.

A small but potentially powerful group of Republicans is vowing to fight any tax increase on principle, even a new tax being eyed to help fund the state children’s health insurance program (SCHIP).

{mosads}“I’m not in favor of raising taxes, period,” said Sen. Saxby Chambliss (R-Ga.), whose state struggled mightily with unpaid SCHIP bills this year before relief came on the war supplemental.

Chambliss and fellow Republicans make clear that they share Democrats’ desire to cover low-income children. But ideological resistance to new taxes, even on the politically vulnerable tobacco industry, clouds the picture for the new SCHIP bill, which must be finished by September and could cost up to $50 billion.

“It’s incumbent upon us to present options for how you get there, how you fix healthcare, without raising taxes,” Sen. Richard Burr (R-N.C.) said.

Senate Minority Leader Mitch McConnell (R-Ky.), whose home state’s cigarette tax shot up tenfold in 2005, recently reflected the less than optimistic mood of the tax hike’s opponents.

“Most people don’t like taxes, but if [people] said, ‘What’s your favorite tax?’ [the tobacco levy] would probably be it,” McConnell told reporters just before Memorial Day.

McConnell predicted a battle over raising cigarette taxes and emphasized that he would not support any plan to do so, but acknowledged, “I expect that they’ll enjoy considerable support.”

Indeed, a March test vote on cigarette-tax language passed, 59–40, bolstering the Finance Committee’s brewing plans to hew to pay-as-you-go rules by using it to pay for SCHIP. The panel aims to mark up Chairman Max Baucus’s (D-Mont.) SCHIP bill as soon as next week, with floor debate likely this summer.

“Chairman Baucus is working closely with his colleagues toward a robust renewal of [SCHIP] that should receive strong support in the Senate,” the aide said.

Still, six of the nine Republicans on Finance, not counting the late Sen. Craig Thomas (Wyo.), voted against the cigarette tax hike earlier this year, suggesting a hard road ahead. One Finance Democrat, Sen. Ken Salazar (Colo.), stressed that the SCHIP bill is not yet complete and said he has not committed to endorsing any funding source.

“A tax is a tax is a tax,” Senate Minority Whip Trent Lott (R-Miss.) said. “We don’t need more taxes.”

Lott revealed a possible key to persuading enough Republicans to swallow an ideologically anathema tax increase: Do not allow SCHIP to cover parents as well as children, as many lawmakers would like.

“It’ll depend on what’s in” the reauthorization, Lott added. “Maybe you could accept [the tax hike] if you can hold the program cost down.”

Limiting the program to children also would deflate GOP agitation over using a new tax to expand a government program, which conservatives are likely to find doubly problematic.  

“Cigarettes are an easy target, but a lot of states keep raising their [tobacco] taxes,” Sen. Jim DeMint (R-S.C.) said. “Sooner or later, smokers aren’t going to pay for every government service.”

Sen. Ron Wyden (D-Ore.), a Finance member, harkened back to the March vote and predicted that the momentum for SCHIP would overwhelm any anti-tax forces.

“The appetite for paying for coverage for children is very large. The appetite for paying for it is not as large,” Wyden said. “As senators are looking at the financing options, they’re going to come back to the tobacco tax and say, ‘We voted for it.’”

The political stars also may have aligned against the tobacco industry and its allies, convenience stores and other retailers.

Health insurance, doctors’ and hospital groups have joined unions and the influential advocacy group Families USA to press for the cigarette tax increase. Meanwhile, four of the tobacco industry’s top five beneficiaries of campaign
contributions during the 2006 election cycle lost their races, according to the Center for Responsive Politics.

Tobacco companies, undaunted by Democratic control of the Capitol, are pressing forward with a lobbying campaign to convince senators to look elsewhere. John Singleton, a spokesman for Reynolds American, acknowledged that McConnell was correct in pointing out the high public support for new cigarette taxes.

“Approximately the percentage of the population that doesn’t smoke and won’t have to pay the tax is in favor of raising the tax,” Singleton said. “It’s pretty easy to say we’re going to target these low-to-moderate income people who are a minority of the population. We don’t think that makes it right.”

The March vote revealed unexpected converts to and foes of the tax on both sides of the aisle. Sens. Thad Cochran (R-Miss.), Ted Stevens (R-Alaska), Mel Martinez (R-Fla.) and other conservatives voted for the potential tax increase, while Reid and Sen. Claire McCaskill (D-Mo.) opposed it.