Civic Groups Oppose SCHIP Expansion Plan

Published February 1, 2009

Organizations across the country are coming together to object to a proposed expansion of the federal State Children’s Health Insurance Program (SCHIP), to be paid for by cigarette smokers. This letter to Members of Congress from leaders of some of the nation’s most respected free-market and taxpayer advocacy organizations outlines key reasons these groups believe the proposal should be defeated.

Dear Members of Congress:

On behalf of the millions of taxpayers, small businesses, families, senior citizens, and shareholders represented by our respective organizations, we strongly urge you to reject any reauthorization or expansion of the State Children’s Health Insurance Program (SCHIP) funded through a tobacco tax increase.

Created in 1997, SCHIP stands as a misguided attempt to address health insurance coverage for children. Falling just short of being a full-blown entitlement program, SCHIP is seriously flawed, crowds out private health insurance, and has far outgrown its original scope and purpose. However, an attempt to not only reauthorize, but significantly expand coverage of SCHIP, which was rightfully vetoed by President Bush in 2007, is expected to be rekindled in the 111th Congress.

Rather than taking further steps to expand the program into a universal entitlement, we the undersigned urge you to seek free-market reforms to empower low-income working families and strengthen access to private health care coverage. Given that 70 percent of the uninsured children in this country already qualify for Medicaid or SCHIP, an expansion of the program is the wrong direction.

As the reauthorization debate heats up again, we urge you to stand strong against all efforts to raise the tobacco tax as a funding mechanism. Taxpayers in many states are already struggling to make ends meet and are already saddled with higher taxes to fund state health care program expansions. Congress should lead the way toward consumer-driven health care rather than replicating misguided tax increase strategies to expand misguided spending priorities.

A higher tax rate will not only scapegoat a segment of the American population for using a legal product, but will also hurt small businesses which often lean on tobacco sales to stay in business. As small businesses continue to be the engine of job creation in the U.S., raising the tax on tobacco would throw a wrench into the gears of economic growth, at a time when this is the last thing America needs.

While proponents of such proposals follow the peculiar and questionable rationale to discourage certain behaviors while relying on their continuance and even expansion as a source of revenue, the absurdity of such reasoning is striking. Tobacco use is already in decline, and in order to avoid paying higher tobacco taxes, consumers will turn to the Internet or the black market. With an increase in illegal activities comes an increase in the cost of enforcing compliance.

Funding an expansion of children’s health insurance on an already-declining revenue stream that the legislation seeks to further decrease is irresponsible and dangerous policy. Ultimately, the tobacco tax serves as a placeholder for the next tax increase that will likely be required to sustain funding levels once revenues from the tobacco tax dry up. The negative ripple effect of this will not only be felt at the federal level, but at the state level, too, with many states relying heavily on tobacco tax revenues.

Ultimately, raising the tobacco tax to fund SCHIP creates a lose-lose situation, and it is for these reasons we, the undersigned, urge you to work and vote against raising the federal excise tax on tobacco for reauthorization of SCHIP.


60 Plus Association, Jim Martin, president
Alliance for Worker Freedom, Brian Johnson, executive director
American Conservative Union, David Keene, president
American Family Business Institute, Dick Patten, president
American Future Fund, Nicole Schlinger, president
American Legislative Exchange Council, Jonathan P. Williams, director, Tax and Fiscal
Policy Task Force
American Shareholders Association, Ryan Ellis, executive director
Americans for Limited Government, William Wilson, president
Americans for Prosperity, Tim Phillips, president
Americans for Tax Reform, Grover G. Norquist, president
Americans for the Preservation of Liberty, Mark Chmura, executive director
Arizona Free Enterprise Club, Steve Voeller, president
Association of American Physicians and Surgeons, Mark Kellen, president
Center for Fiscal Accountability, Sandra Fabry, executive director
Center for Individual Freedom, Jeffrey Mazzella, president
Citizen Outreach, Chuck Muth, president
Citizens’ Alliance for Responsible Energy, Marita Noon, executive director
Citizens for Limited Taxation, Chip Faulkner, associate director
Club for Growth, Pat Toomey, president
Commonwealth Foundation, Matt Brouillette, president
Competitive Enterprise Institute, Sam Kazman, general counsel
Council for Citizens Against Government Waste, Tom Schatz, president
Evergreen Freedom Foundation, Bob Williams, president
FreedomWorks, Matt Kibbe, president
Howard Jarvis Taxpayers Association, Jon Coupal, president
Illinois Alliance for Growth, Greg Blankenship, president
Institute for Liberty, Andrew Langer, president
Let Freedom Ring, Colin Hanna, president
Maryland Taxpayers Association, Inc., Dee Hodges, chairman
National Center for Public Policy Research, Amy Ridenour, president
National Tax Limitation Committee, Lew Uhler, president
National Taxpayers Union, Duane Parde, president
New Jersey Taxpayers’ Association, Jerry Cantrell, president
Property Rights Alliance, Kelsey Zahourek, executive director
Reason, Adrian Moore, vice president, Dr. William Greene, president
Route 3 Benefits, Ralph Weber, president and CEO
Small Business and Entrepreneurship Council, Karen Kerrigan, president and CEO
Tennessee Tax Revolt, Ben Cunningham
Texans for Fiscal Responsibility, Michael Quinn Sullivan, president and CEO
Don Racheter, founder and moderator, Iowa Wednesday Group