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October 26, 2007

They're Inhaling. Big Time.

SCHIP is back on Congress' plate, and the House yesterday passed a new version of the bill to extend schalami-schlice schocialism in health care to the middle class. Put aside the adverse implications for the budget. Put aside the adverse consequences---as certain as the sunrise---for the future quality of medical care and the advance of medical technology. Put aside the future rationing, dehumanization of the old and sick, and other blessings of government compassion.

Let us focus instead on the narrow issue of finance; whence the dollars---$20 billion of them per year---in the new bill? The proponents of SCHIP expansion claim that the increase in the tobacco tax in the bill---from 39 cents to a dollar per pack---will pay for this monstrosity. Oh, please. The resulting enhanced incentives for black-market cigarette sales, for purchases from Indian tribal lands, for internet sales, and the like will be powerful, and there is no chance---none at all---that the net revenues will prove to be those claimed. Under a broad set of assumptions, net revenues will be zero or negative, as untaxed sales reduce revenues not only from the new tax but from the existing one also. And this is true not only for federal tobacco revenues, but for state and local revenues as well, since the substitution of untaxed sales for taxed ones will affect all government budgets dependent upon the vices of smokers.

And so El Presidente W is absolutely correct to threaten a second veto over this finance issue, as well for a host of other reasons. Maybe Congress will override this time---or maybe not---but a stand for principle never hurts. In this case, if a stand against an inefficient tax intended to pay for more health-care schocialism is wrong, W shouldn't want to be right.

Posted by Benjamin Zycher at October 26, 2007 12:59 PM

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