Wired reports on the Democrats plan to add $35 billion in new spending for children’s health insurance by dramatically raising federal excise taxes on tobacco products. The problem with this plan is that it makes no economic sense — they won’t be able to raise the money projected, and furthermore they only will be able to sustain the funding for five years.
Funding anything with tobacco excise taxes is a bad idea — because it isn’t a stable funding source. If you raise the price of cigarettes, more people will quit smoking. If you raise the price of luxury items like cigars (the current bill increases the maximum federal tax on cigars by over 20,000% to up to $10 a cigar) then people will stop buying cigars. For example, I’ll smoke at most a few cigars a month, no more than 1 per week. If the amount of tax pushes the price of cigars up to where even the cheapest cigars are north of $15 a cigar, I won’t smoke them at all. Instead of contributing a few dollars to the federal budget a year in excise taxes, it’ll be zero. Multiply that by the thousands or millions of causal cigar smokers, and it’s clear that the government simply can’t count on raising $35 billion solely on the backs of smokers.
By 2012, Congress either has to raise taxes elsewhere or the program dies. Either outcome is bad. It’s the sort of voodoo math that Congress gets away with all the time — pretending that they’re doing something to help by creating another program they can’t fund.
If Congress wants to fund children’s healthcare, that money should come out of the general fund and should be matched by commensurate reductions in discretionary spending. Spending a few million per district on pork-barrel projects should be a lesser priority than covering the insurance gap for children, right?
Except for Congress, it doesn’t work that way. They want to have their pork and eat it too — and meanwhile the American taxpayer gets stuck with the bill.
UPDATE: I wonder how many uninsured children could get healthcare instead of Charlie Rangel getting a $2 million dollar taxpayer-funded shrine to himself in New York?
For once, we agree on something. This proposal is so stupid that it defies belief. There is perhaps nothing more idiotic or more dangerous that the government does than making itself increasingly revenue-dependent on the declining product of tobacco. Working in state government, I see that hypothetical tobacco dollars are the funding mechanism for nearly every state program on the books for as far as they eye can see. The threshold of diminishing returns will be crossed as government gets increasingly gluttonous in fleecing smokers, and the financial consequences will be ferocious.
I could write for hours describing why this idea is moronic beyond comprehension, but it’s political suicide for the Democratic Party to be the driving force behind foisting a stratospheric tax increase on their own working-class base. The most regressive tax in existence is the cigarette tax….and the party running on a platform of reinstituting “economic fairness” is endorsing nearly tripling that tax? Come again? Something tells me the blue-collar voters rallying to the cause of economic populism in the 2006 election didn’t have a tax increase against themselves worth hundreds or even thousands of dollars per year as a top priority for the U.S. Senate.
As I understand it, only the Senate favors this tobacco tax hike. The House is reportedly looking for alternative funding mechanisms, at least according to Bob Novak’s column last week. Bush would almost certainly veto such a proposal anyway, so it probably won’t happen in the near-term. But what a gift the Dems are handing the GOP heading into the 2008 elections by being on record trying in favor of path-of-least-resistance soak-the-poor taxation against a demographically Democrat-friendly voting bloc.
This would be a last straw for me, as this tax increase is so symbollic of the nanny state tyranny awaiting this country in the generation to come. Voting Republican will never be an option for me, but a vote in favor of this insanity would insure I would not carry any water for the Democratic Party again any time soon, nor would they be my default vote in future elections.
“I could write for hours describing why this idea is moronic beyond comprehension, but it’s political suicide for the Democratic Party to be the driving force behind foisting a stratospheric tax increase on their own working-class base.”
Gee, Mark, welcome to the arena. What the hell do you think the Democrat Party has been doing for the last 60 years but foisting stratospheric tax increases on their own working-class base?? The first procedural vote Pelosi held in the resurgent Democrat-controlled House was to establish legislative rules to make it easier to raise taxes by a simple majority vote, that is, by a straight party-line vote. Tax the rich? Hardly. Most of “the rich” are Democrat primary campaign donors who already contribute more than a third of Federal tax revenue. They’re not the target, the middle-class is. Always has been, because that’s where the money is!! It’s the reason why the GOP has far more small-time individual donors than the Democrat Party, which has far more million-dollar donors, including the richest members of the U.S. Senate.
You’ve been lied to all your life, Mark, by the Marxist-Leninist Democrat Party you support, which is truly “moronic beyond comprehension” for anyone who believes in individual freedom.
Eracus, the Democrats have it seriously wrong on two major issues….the Republicans have it wrong on virtually every other major issue. Thankfully, there’s enough room on the political spectrum for people to oppose ill-conceived Democratic ponzi schemes such as this cigarette tax, yet still oppose the worldview of people like yourself who believe any level of taxation is theft. Your America of choice, a law of the jungle “ownership society” comparable to modern-day Somalia, would make a 61-cent-per-pack cigarette tax increase seem like a pretty small issue by comparison.
So, does that strawman do a good job of keeping the crows away?