W. Va. May Hike Cigarette Tax to Expand Medicaid

Published May 1, 2009

West Virginia legislators are considering a bill to fund an expansion of the state Medicaid program through an increase in the cigarette tax. The proposal would hike the tax 118 percent, from 55 cents to $1.20 per pack.

The proposal comes on the heels of the recently passed increase in the federal tobacco tax, up 61 cents per pack, which will go into effect April 1 as part of the State Children’s Health Insurance Program expansion.

West Virginia’s tax increase proposal, identified as HB 2746 in the state House of Delegates and SB 420 in the state Senate, is one of four tax hikes offered by Del. Don Perdue (D-Wayne) and Sen. Roman Prezioso (D-Marion), who serve as the delegate and senate chairman, respectively, of the chambers’ respective Health and Human Resources committees.

Bill ‘Seems Irresponsible’

The bill is unlikely to provide the revenue and reforms its supporters expect.

“At a time when states are facing record budget deficits caused by past overspending and a weakening economy, it seems irresponsible for lawmakers to expand a social entitlement program while imposing a new tax,” said Paul Guppy, vice president of research at the Washington Policy Center.

“Cutting state taxes and regulations to make private health policies more affordable would be a far more effective way to make sure people get the coverage they need,” Guppy said.

Gov. Joe Manchin (D) has expressed support for the bill, which state budget analysts predict will bring in $110 million annually. That additional projected revenue would be earmarked for expanding Medicaid, giving a tax credit to small businesses that provide their employees with health insurance, and funding the treatment and prevention of smoking-related chronic illnesses.

Contradictory Aims

Dr. Roger Stark, senior fellow with the Washington Policy Center, says there is a serious contradiction in raising cigarette taxes to raise funds for smoking cessation programs. “As people quit smoking, the revenue stream for your health care programs goes down,” he said. “Then back to the taxpayers for more money.”

The success of past efforts to discourage cigarette smoking makes the plan even more dubious, says John R. Graham, director of health care studies at the Pacific Research Institute.

 “Cigarette smoking rates among American teens in 2008 are at the lowest levels since the early 1990s,” Graham noted. “I would challenge West Virginia legislators to tell us how many more people they plan to encourage to start smoking in order for them to finance their ambitions, and then to defend that plan on moral grounds.”

Tax Avoidance Increases

Increasing tobacco and other “sin” taxes rarely results in the influx of cash into government coffers proponents expect, said Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute. “Maryland recently raised cigarette taxes and got only half of the projected revenue,” he said.

“Continuing the burden on smokers with unreasonably high taxes will cause cigarettes to become a black market commodity,” Scandlen continued. “West Virginian smokers will just slip across the state line and buy their tobacco from retailers in other states, such as Kentucky, which have far lower cigarette taxes.”

Rikin Shah ([email protected]) writes from West Virginia.

For more information …

Senate Bill 420: http://www.legis.state.wv.us/Bill_Text_HTML/2009_SESSIONS/RS

House Bill 2746: http://www.legis.state.wv.us/Bill_Text_HTML/2009_SESSIONS/RS