Cigarettes Could Face 61-cent Tax Increase

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Cigarettes Could Face 61-cent Tax Increase

WASHINGTON -- Under a tentative deal worked out earlier this week between Democrats and Republicans on the Senate Finance Committee, smokers would pay an extra 61 cents per pack of cigarettes in federal taxes to fund health insurance to approximately two million children, USA Today reported.

The tax increase would hike the federal rate from 39 cents to $1 per pack, a 156 percent increase, according to the newspaper. Over the course of five years, the tax would raise about $35 billion to pay for an expansion of the Children's Health Insurance Program (CHIP), the report stated.

"It really does come down to a choice between children and tobacco," Senator Gordon Smith (R-Ore.), told the paper. Smith originally proposed the 61-cent increase. "This is a 'two-fer.' It does decrease smoking, and it does connect public health care costs with one of the drivers of that cost, and that's tobacco."

While details still need to be worked out before the committee votes on the package, the CHIP program's expansion through tobacco tax has broad support, the report stated.

The federal tobacco tax, last raised in 2003, has never been increased by more than a dime per pack. This year, 11 states increased tobacco taxes, putting the national state average at $1.07, according to the report.

Meanwhile, the House of Representatives is working on a similar package that could add $50 billion to the program over five years by combining a tobacco tax increase, along with reductions in federal payments to private insurers under Medicare.

However, President Bush has voiced his opinion of blocking such deals. He has criticized some states' expansions of the program to adults and less needy children, the report stated.

"The program is going beyond the initial intent of helping poor children. It's now aiming at encouraging more people to get on government health care," Bush said earlier this week in Cleveland. "I'll resist Congress' attempt to federalize medicine."