The Cigarette Tax Increase to Finance SCHIP (CRS Report for Congress)
| Release Date |
Revised March 6, 2009 |
| Report Number |
RS22681 |
| Report Type |
Report |
| Authors |
Jane G. Gravelle, Senior Specialist in Economic Policy |
| Source Agency |
Congressional Research Service |
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Summary:
On January 15, the House passed H.R. 2, a bill which included increased tobacco taxes to finance State Children's Health Insurance Program (SCHIP). This legislation was similar to that passed in the 110th Congress (H.R. 976 and H.R. 3162) although the initial House proposal had smaller tax increases.. H.R. 2 increases cigarette taxes, the primary source of tobacco tax revenues from 39 cents to $1.00. According to the Joint Committee on Taxation, the cigarette tax will raise $6.4 billion in federal revenues in FY2010 with all federal tobacco taxes increases raising $7.1 billion. A similar tax increase was contained in the Senate bill, and in the final proposal, P.L. 111-3 (although in both case the tax was increased by an additional two thirds of a cent, to $1.0066.) The analysis suggests that state and local governments will lose about $1 billion in cigarette tax revenues and up to $0.5 billion in lost revenues from the tobacco settlement payments. The legislation is now being considered in the Senate.
A justification is to discourage teenage smoking, but this effect is probably small; a reservation is that the burden falls heavily on low-income individuals. Taxes on other tobacco products are also increased, although cigarette taxes account for most tobacco revenues.
In the 110th Congress, the President vetoed the 110th Congress SCHIP proposal on October 3, 2008, the House failed to override the veto and a new bill, H.R. 3963 passed the House and Senate, with no changes in the cigarette tax, but changes in spending rules, and the President vetoed that version on December 12, 2008.
