Senators Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa), the chairman and ranking member of the Senate Finance Committee, announced on Friday that they had reached a bipartisan solution for funding a massive new expansion of the 10-year-old State Children’s Health Insurance Program (SCHIP): increase the tobacco tax by 61 cents per pack, for a total of one dollar a pack.
What their proposal amounts to is a huge new tax—a 156 percent increase—on mostly low-income people (because they are more likely to smoke) in order to provide subsidized health insurance to middle and upper-middle income families.
Tax increases just don't get much more regressive than that!
President Bush has asked Congress to bump up SCHIP’s current budget by $5 billion over five years. The Baucus-Grassley agreement would increase it by $35 billion over five years—a seven-fold increase over President Bush’s request.
At least it’s not the $50 billion increase Senate Democrats had been clamoring for, or the $60 billion House Dems are demanding.
Those more-expensive plans called for increasing the eligibility to 400 percent of the federal poverty level—more than $80,000 for a family of four—and to open the program up to more adults, even though there are already more than 600,000 adults in this “children’s program.”
Sens. Baucus and Grassley aren’t releasing details yet, but they assure us that they aren’t expanding adult eligibility or opening the program up to families with solid incomes.
Count us as skeptical. A seven-fold increase over President Bush’s plan is going to have to put that money somewhere. A recent government report said that between 25 and 50 percent of the children enrolled in the program now dropped previous private insurance to gain the government-subsidized coverage. The compromise will only exacerbate that problem.
Of course, lower-income working Americans also get abundant help from the federal government. There are several welfare programs that subsidize housing and food and other needs. And more than 20 million participate in the Earned Income Tax Credit, which provides direct cash assistance to working families.
So while the government doles out money to the poor with one hand (welfare), it takes it away with the other (tobacco tax). It’s a transfer of a transfer. These days, this is what passes in Washington for “creative bipartisan thinking.”