NCPA - National Center for Policy Analysis


November 8, 2007

Oregon Governor Ted Kulongoski recently blamed the failure of a state children's health insurance program (S-CHIP) -- paid for by cigarette taxes -- on the tobacco industry buying the election.  In reality, voters didn't want tax increases, says the Wall Street Journal.

For example:

  • The cigarette tax increase is highly regressive; only about 20 percent of Oregonians smoke and most of those are lower income.
  • Tobacco taxes reduce smoking, meaning they will soon not yield enough revenue to pay for ever-growing health costs.
  • An analysis by William Conerly, a member of Oregon Gov. Kulongoski's Council of Economic Advisors, found that a straight S-CHIP expansion funded by a tobacco tax was unsustainable, with costs exceeding revenues by $115 million by 2017.
  • Counting "crowd out" -- the migration to public from private insurance -- Conerly predicted a $638 million deficit within the decade.

There are political lessons here, in case anyone in Washington is paying attention, says the Journal:

  • Voters are rightly concerned about health care and would like everyone to have insurance, but they realize that government programs are very expensive, says the Journal.
  • Americans also don't seem to want to pay for health care reforms directly through higher taxes.

Source: Editorial, "Schip Wreck," Wall Street Journal, November 8, 2007.

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