Experts Agree with President’s Rationale to Veto SCHIP Proposal

Published September 24, 2007

(Chicago, Illinois – September 24, 2007) Created in 1997, the State Children’s Health Insurance Program (SCHIP) provides health insurance coverage for families with too much income to qualify for Medicaid, but not enough income to afford private insurance. SCHIP matching funds are set to expire unless Congress reauthorizes the program–and governors have been lobbying for significantly more money.

Some lawmakers are moving forward to seek out new money for the program. One idea currently being offered is particularly disturbing: raising SCHIP revenue by increasing the federal excise tax on tobacco products.

Last week, President George W. Bush announced he will veto Congress’ $35 billion expansion effort of SCHIP to prevent the federalization of health care.

The following comments on the White House’s move are from Trevor Martin, director of government relations for The Heartland Institute, and Steve Stanek, a Heartland research fellow and managing editor of Budget & Tax News, a monthly Heartland publication.

You may quote from this statement or contact Martin or Stanek directly for further comment.

Trevor Martin
[email protected]
Government Relations Director

“Taxes on tobacco products are already high, and structured in such a way so as to be not only unfair to smokers, but also (and especially) to the poor.

“Tobacco taxes are, by their nature, a declining source of revenue, thanks to government’s insistence that the number of tobacco users decrease. Ironically, governments continue to rely upon the revenue generated from this dwindling group of taxpayers.

“Raising taxes to fund a program whose funding allocation is already misspent is not sound public policy. For example, some states allow SCHIP participation for families with incomes up to $72,000–and 14 states allow adults to participate.”

Steve Stanek
[email protected]
Research Fellow
Managing Editor, Budget & Tax News

“People need to stop listening to the demagoguery and look at the facts. One key fact is this: The Congressional Budget Office estimates 50 percent of new SCHIP funds would go to children in families who already have private insurance. Many economists say the figure could be even higher. This SCHIP expansion aims to subsidize solidly middle-income families who already have insurance for their children. It is not aimed at children in working-poor families as the SCHIP program was intended.

“Furthermore, it is absurd to enact government programs that rely on smoking tax revenue even as tax and health policies discourage smoking. The CBO and U.S. Treasury Department have estimated a revenue loss to the states of $1.07 billion to $1.2 billion a year, as the higher price for cigarettes cuts consumption and prompts smokers to choose low-cost off-brands or turn to black markets.”

For further information about The Heartland Institute, please contact Harriette Johnson, media relations manager, at 312/377-4000 or email [email protected].