Child Health Bill Relies on Hefty Tobacco Tax Hikes

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WASHINGTON — The U.S. House on Wednesday approved a major expansion of federally funded health coverage for children – a measure that would slam cigar manufacturers in Tampa and across the country with a big tax increase.

The bill — which passed on a mostly party-line 289-139 vote — would authorize about $33 billion over the next 4 1/2 years to renew the State Children’s Health Insurance Program (SCHIP).

The measure would also expand the coverage to an added 4.1 million children, on top of the current 7 million now enrolled.

The Democratic-controlled Senate is expected to pass a similar bill this week. Unlike President Bush, who vetoed the measure twice, incoming President Barack Obama has promised to sign the bill into law.

Supporters of the measure, including Tampa’s Democratic Rep. Kathy Castor, say they hope the legislation will help make the 800,000 currently uninsured children in Florida eligible for coverage. 
The measure would primarily be paid for through a 61-cent-per-pack increase in the federal cigarette tax. 

But as much as $2.1 billion of the costs will come from a revised federal excise tax on cigar manufacturers, with a maximum of 40 cents on big cigars – an increase of 700 percent over the current cap of five cents. 

Small cigars, also wrapped in brown papers but sized like cigarettes and sold in packs of five, 10 or 20, would be taxed at a rate of $1 per pack. The tax on little cigars will be phased in and reach $1 per pack ($50 per 1,000) in 2015. In 2009 they will be taxed at $12.50 per 1,000 (25 cents per pack), in 2011 at $25 per 1,000 (50 cents per pack), in 2013 at $37.50 (75cents per pack). 

Despite these hikes, the cigar industry – including local cigar manufacturers in West Tampa and Ybor City within Castor’s district — was in fear that the cap would be much higher. An original version of the bill in 2007 called for a $10 cap on big cigars, and later versions had a cap of $3 per cigar. 

“IIt’s ironic that Congress is ready to spend $25 billion to bail out other industries. We didn’t even want a 25-cent bail-out. We just wanted to be left alone,” said Eric Newman, president of the J.C. Newman Cigar Co., president of the Cigar Manufacturers Association of Tampa and chairman of the Cigar Association of America, which represents manufacturers and importers. 

“But at least we’re going to live to fight another day,” added Newman, pointing out that the previous tax proposals would have “devastated” the industry.

Norman Sharp, president of the Cigar Association of America, predicted the higher cigar taxes could result in as much as a 30 percent decline in the sales of large cigars.

Despite Castor’s high-profile involvement in the bill that includes such a drastic tax hit on a home industry, Newman and others in the industry on Wednesday were not critical of her. 

Rather, they credited Castor and Rep. Kendrick Meek of Miami, the state’s Democrat on the tax-code writing Ways & Means Committee, as being instrumental in softening the tax increase from the earlier, higher proposals.

“Kathy and Meek were very helpful and supportive of our positions,” said Newman. “She helped us make the best of a tough situation. We don’t like any tax. But we compromised and saw an opportunity to stay in business.”

Florida KidCare is the state’s children’s health insurance program for uninsured children under age 19. It includes four different parts, or programs: MediKids, Healthy Kids, Children’s Medical Services and Medicaid. KidCare enrollment in the state is 1.5 million. But there are currently as many as 800,000 uninsured children in Florida. 

Joining Castor in voting in favor of the bill was Republican Rep. C.W. Bill Young of Indian Shores. Republican reps. Ginny Brown-Waite of Brooksville, Gus Bilirakis of Palm Harbor, and Adam Putnam of Bartow voted against the bill.

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