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1 Gerald Prante, A State-by-State Estimate of the Impact of SCHIP Expansion and a 156 Percent Cigarette Tax Hike 1 (2007)

handle is hein.taxfoundation/ffiixz0001 and id is 1 raw text is: FOUNDATION June 28, 2007 A State-by-State Estimate of the Impact of SCHIP Expansion and a 156 Percent Cigarette Tax Hike by Gerald Prante Fiscal Fact No. 88 Here we provide a simple estimate of the spending and tax changes that would occur in each state if Senator Gordon Smith's proposal to expand federal health spending by raising the federal excise tax on cigarettes becomes law. Senator Smith's bill would have the federal government more than double the funding of the State Children's Health Insurance Program (SCHIP). This federal program currently spends between $5 and $6 billion each year, and Sen. Smith would spend $46.5 billion more over five years. SCHIP was originally designed to fund health insurance for children in households that earn between 100 percent and 185 percent of the poverty guidelines ($38,203 for a family of four), but administrators have permitted states to buy insurance for adults without children and for higher-earning households, those within 300 percent of the poverty guideline ($61,950 for a family of four).' The funding mechanism would be a federal cigarette tax hike, from 39 cents to $1 per pack. 2 Currently, states add an average tax of $1 per pack. The basic finding is that some states will be dramatic winners and others big losers. There is little correlation between SCHIP spending and smoking rates, even though both correlate generally with poverty. This is largely caused by the considerable variation in SCHIP spending even among states with similarly large populations of children in low-income households. In economic terms, then, Senator Smith is suggesting that the federal government more than double its most regressive tax-that is, the tax that hits the poor hardest. Perhaps to mitigate this hit on the poor, he suggests that the government spend the funds on one of its most progressive programs, that is, a program originally designed to funnel money to low-income households with children. However, because states make their own SCHIP policies, the poor in some states will face the higher cigarette tax but receive little in extra SCHIP spending. Low-income families would be made much better off as a group if the SCHIP expansion were limited to poor families and funded by raising a tax that is paid by a broad swath of the