Prevention Matters

The old joke goes that two men were being chased by a bear when one of them shouted to the other one: "What are we gonna do? We can't outrun that bear!" The second man replied: "I don't have to outrun him, I just have to outrun YOU!"

That seems to have been big tobacco's philosophy earlier this week during the debate over a hike in federal tobacco taxes. Sen. Jim Webb, D-Va., offered an amendment to cut the 61-cent-a-pack tax hike to only 37 cents, and make up the difference with a new system of taxing the income of partners in hedge funds as ordinary income.

Could big tobacco have been betting that, in the current economic climate, hedge fund managers are more despised among the American public than they are? Considering that Webb withdrew the amendment due to a lack of support, was it a bad gamble? Who outran the bear?

While Congress still needs to resolve differences between the House and Senate version of the State Children’s Health Insurance Program (SCHIP) expansion, the goal of prevention advocates to raise the Federal tobacco excise tax to $1 per pack now seems assured. Both House and Senate versions of the bill include a 61 cent increase in the Federal cigarette excise tax (current tax is 39 cents) with similar increases in the tax on other tobacco products. Tobacco control experts believe the increase, which will fully fund the SCHIP program expansion, will help an estimated 1 million adult smokers to quit and two million kids from starting.

One remaining issue of concern for Partnership is the difference in how the House version of the bill treats the tax increase on so-called little cigars. Partnership believes little cigars, which look and are packaged identical to cigarettes except for a brown tobacco wrapper, should be taxed at the same rate as cigarettes; a provision that is contained in the Senate version of the bill. Final action on the legislation is expected to be swift with Congress committed to presenting a final bill to President Obama before the scheduled congressional district work period that begins February 16.

Sen. Jim Webb (D-VA) this evening withdrew his amendment to reduce a proposed increase in the federal tobacco tax from 61 cents to 37 cents. He sought to attach the amendment to a bill that would expand the State Children’s Health Insurance Program (SCHIP). Webb had proposed replacing that tobacco tax revenue with a new system of taxing the income of partners in investment management services firms (e.g., hedge funds) as ordinary income.

Thanks to all of you who contacted your senators and urged them to oppose this amendment.

By Diane Canova,
Managing Senior Fellow for Tobacco
Partnership for Prevention
dcanova@prevent.org

We have just learned that the Senate is expected to vote today on an amendment by Sen. Jim Webb (D-VA) to the State Children’s Health Insurance Program (SCHIP) bill that would only increase the federal tobacco tax by 37 cents, instead of the proposed 61 cents. This amendment would dramatically reduce the new federal tobacco product tax rates to fund expansion of the SCHIP legislation, substituting a new system of taxing the income of partners in investment management services firms (e.g., hedge funds) as ordinary income.

Tobacco taxes are not only a good way to raise revenue, but they are a proven deterrent to tobacco use. This increase combines good fiscal policy with good public health policy.

Please call your senators' offices today expressing your support of the full 61 cent cigarette tax and opposing the Webb amendment to lower the tax. Let us know if you have any questions or need more info.