senate supports tobacco tax increase

The Senate has fully approved, by a vote of 68-31, plans to expand the State Children’s Health Insurance Program (S-CHIP), which provides health coverage to low-income, uninsured American children whose parents do not qualify for Medicaid. To do this, the bill will increase taxes on cigarettes, cigars and other tobacco products as a way of funding the program.

The legislation calls for a 61-cent increase in the federal tobacco tax. A similar bill from the House of Representatives would raise the federal cigarette tax by 45 cents a pack and raise the tax on other tobacco products. The House version of bill would increase S-CHIP’s resources by $47 billion over five years, affording the ability to cover an additional 5 million children.

The Senate needs to negotiate final legislation with the House before S-CHIP expires on Sept. 30.

In opposition of the bill, President Bush has said on record that he will veto the legislation, claiming, “it goes too far in federalizing health care,” according to his Statement of Administration Policy issued by the Office of Management and Budget (OMB). “The administration also strongly opposes the proposed tax increases contained in the legislation. The use of tax increases to fund spending increases is undesirable and inadvisable. The administration is concerned about the negative impact on state budgets from the loss of direct revenue and the uncertain impact this may have on states and bondholders in relation to the tobacco Master Settlement Agreements.”

The National Association of Tobacco Outlets (NATO) has been supporting the president’s veto efforts, arguing that the tobacco tax will hurt retailers, suppliers and farmers in the industry.

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