Back to a Tobacco Tax
THE CONGRESSIONAL Republicans are struggling to cover the cost of government next fiscal year without resort to either surplus Social Security funds or gimmicks. It's not clear that they can; not even on their own side do they have the votes to make the s
The president proposed as part of his budget last February a tobacco tax increase of 55 cents per pack of cigarettes. The idea was instantly dismissed as unrealistic -- little more than budgetary show -- because a similar proposal had failed in the previous Congress. But OMB Director Jack Lew has continued to urge its consideration as good social and fiscal policy alike, to which Congress might well in the end return for lack of a comparable alternative. He is right to do so.
The increase would serve as a deterrent to smoking, particularly among the young, by driving up the price. The price increase, atop that likely to result from last year's settlement of lawsuits by the states against the tobacco companies, would be formidable. The revenue, an estimated $34 billion over five years, plainly also would be of help. The federal government was entitled by law to a share of the proceeds from the state lawsuits, which sought recovery, in part, of past Medicaid expenditures to treat tobacco-related illnesses.
Most of those expenditures were federal, because the federal government pays more than half of Medicaid costs, and the president's budget assumed the recovery of some of this money. Congress, however, partly at the behest of the governors' association, earlier this year waived the federal claim. The waiver tightened the budget, and the governors' position irritated some Democrats, who have indicated they might support cuts in various forms of federal aid to the states in return. But these would be mainly cuts in programs that help the poor. The better way to square the tobacco account would be by a tax.
The Republican leaders' resort to gimmicks to make it appear they are adhering to spending limits that everyone understands they are going to pass, most likely by more than $20 billion, has begun to embarrass some of their own members. Sen. Chuck Hagel sent a letter to colleagues last week, complaining that Congress was "living a charade" that demeaned both it and the country. Sen. Larry Craig said in an interview that Congress ought "to be straightforward with the people." Senate Majority Leader Trent Lott acknowledged that "we're not going to meet the caps," the spending limits Congress has set for other than Social Security funds.
If they want to use the entire Social Security surplus to pay down the debt -- but also want to be "straightforward with the people" -- and don't have enough money to cover all the government's other costs, they have only one alternative, which is to find some extra money. Tobacco is a good place to start.