No Tobacco Tax Increase

Published August 1, 2007

Dear Senators:

On behalf of millions of taxpayers, small businesses, families, senior citizens and shareholders, we strongly urge you to work and vote against any tobacco tax increase for reauthorization of the State Children’s Health Insurance Program (S-CHIP).

In general, S-CHIP is a misguided attempt to address health insurance for children. Instead of morphing 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. As 70 percent of the uninsured children in this country already qualify for Medicaid or S-CHIP, an expansion of the program is the wrong direction.

As the reauthorization debate continues we urge you to work and vote against all efforts to raise the tobacco tax to fund the swelling program. Taxpayers in many states are already facing higher taxes to fund state health care program expansions. Rather than joining states in taking more money from taxpayers to fund misguided priorities, it is crucial that Congress lead the way toward consumer driven health care policy.

Raising the tobacco tax to fund S-CHIP creates a lose-lose situation. A higher tax rate will not only scapegoat a segment of Americans for using a legal product, but will also hurt small businesses, which often lean on tobacco sales to stay in business. As small businesses are the engine of job creation in the U.S., raising the tax on tobacco is destroying jobs.

In order to avoid paying higher and higher tobacco taxes, consumers will turn to the Internet or out-of-state sources for tobacco products. In fact, tax increases have led to an increase in illegal activities and smuggling. With an increase in illegal activities comes an increase in the cost of enforcing compliance. The very reasoning behind tobacco tax increases is fl awed. Proponents argue the government can have increased revenue and less tobacco use. It is absurd to argue that a tax increase will diminish the number of people buying tobacco and that it will increase tax revenues. Funding an expansion of children’s health insurance on an alreadydeclining revenue stream that the legislation seeks to further decrease is dangerous policy.

Once again we, the undersigned groups, urge you to work and vote against raising the federal excise tax on tobacco for reauthorization of S-CHIP.


Jim Martin
President, Freedom Works

Matt Kibbe
President, Freedom Works

Karen Kerrigan
President & CEO, Small Business and Entrepreneurship Council

John Berthoud
President, National Taxpayers Union

Grover Norquist
President, Americans for Tax Reform

Tim Phillips
President, Americans for Prosperity

Thomas A. Schatz
President, Council for Citizens Against Government Waste

Jeffrey Mazzella
President, Center for Individual Freedom

Ryan Ellis
Executive Director, American Shareholders Association