Tuesday, August 21, 2007

SCHIP Expansion and State Finances 

Filed As:  Budget and Tax, Health Care

The Heritage Foundation looks at the effect of the proposed Congressional SCHIP expansion, and offers A State-by-State Analysis of the effect on finances.

The SCHIP expansion under consideration would increase the federal tobacco tax, but as Heritage notes, this would result in a loss of state tobacco tax revenue. For instance, the they calculate that my state, Pennsylvania, would lose $40-$50 million annually in state tax revenue.

Heritage also looks at the redistribution effect of the tobacco tax - i.e. states that pay more vs. states that get more. They find that PA residents would pay $204 million more in taxes than the state would get in grants.

The most troubling finding in my view, is that to provide the funding level required from the tobacco tax increase, we would need 9 million new smokers in five years (at a time when the number of smokers is declining) and 20 million more in 10 years. Of course, we know we won't get more smokers, we will simply increase taxes once again to pay for all this proposed spending.

• posted by Nathan Benefield
• 2:05 pm
• 0 comment