The U.S. Senate Finance Committee is considering legislation to expand the State Children’s Health Insurance Program, a meritorious federal program that provides states with funding to make health insurance available for children in low-income families.
However, this proposal would fund SCHIP by increasing the federal cigarette tax from $.39/pack to $1/pack, and raising the federal tax on cigars, pipe tobacco and smokeless tobacco by 156 percent.
If these tax increases are enacted, Maine could lose an estimated $9.28 million in state cigarette tax revenue, plus approximately $3.67 million in national cigarette settlement payments, for a projected annual loss of $12.95 million.
This significant impact on Maine’s budget would occur because a Congressional Budget Office report estimates for every 10 percent increase in cigarette prices, national cigarette sales volumes will decline by up to 5 percent.
Since the proposed $.61/pack tax increase is closer to an average 14 percent price rise, national cigarette sales volumes may decline by up to 6 percent or more based on the CBO report. With a 6 percent sales decline, Maine’s cigarette and tobacco tax collections would decrease by a similar percentage, and the tobacco settlement payments would be reduced because they are based on national cigarette sales volumes.
To avoid a devastating impact on Maine’s retail businesses and to prevent a significant revenue loss for Maine, Congress needs to find an alternate, broad based revenue source to fund the reauthorization of the SCHIP program.
Thomas A. Briant, Minneapolis, Minn.
Executive director, National Association of Tobacco Outlets