Taxing The Poor

Robert Robb, writing in the Arizona Republic, points out the many absurdities of the massive expansion of the State Children's Health Insurance Program (SCHIP) being proposed by Congressional Democrats. It will expand the program - already distorted by many states to cover people it was never intended for - well up into the middle class. And it is funded on the backs of the poorest citizens.

No one opposes reauthorization for its intended purpose. The Bush administration has proposed reauthorization for this targeted population with an extra $5 billion in funding over the next five years, over the current base of $25 billion.

The problem is that SCHIP has expanded beyond its original scope, as so often happens with federal programs. In the early years, many states couldn't use all their SCHIP money, so the feds permitted excess funds to be used by other states to extend coverage to children beyond 200 percent of the poverty level and even adults.

In Arizona, the SCHIP plan is called KidsCare. A Government Accountability Office study found, however, that 56 percent of the people enrolled in "KidsCare" were actually adults.

Fifteen states now provide SCHIP coverage for children above 200 percent of the federal poverty level, and 14 states cover adults.

Congressional Democrats propose not only to fund these existing expanded programs but provide enough funding for other states to substantially expand eligibility, as well. In all, Democrats are proposing to more than double SCHIP funding, allowing universal coverage up to 300 percent of the federal poverty level, as Gov. Janet Napolitano has proposed for Arizona.

That would provide coverage up to a family income of about $60,000 a year. Since the median family income in the United States is just over $46,000, this reaches well into the middle class…..

…..To pay for the SCHIP expansion, Democrats are proposing to raise tobacco taxes by up to 61 cents a pack.

Tobacco taxes are highly regressive. So, basically, Democrats are proposing to tax the poor to pay for the health care of the middle class.

Tobacco taxes are also highly uncertain. Health-care advocates like them because the evidence is that they do reduce consumption. However, states and the federal government have already loaded up various programs, many involving health care and children, on their backs. The odds are very strong that tobacco taxes will not produce the revenues being obligated.

Robb is quite correct. The lower a person's income, the more a tobacco tax will bite. It is one of the most regressive of taxes. It will, inevitably, also cause falling tax revenues, leaving a vast, unfunded mandate. That many states are already misusing the original intent of SCHIP is not a good reason to expand it so other can also misuse it. Placing the tax burden for that expansion squarely on those least able to afford it is just plain wrong.

Other Links to this Post

1. Blue Crab Boulevard » Democrats: Tax The Poor, Screw The Seniors — Wednesday, 1 August , 2007 @ 6:38 pm