WINSTON-SALEM, N.C. – With the U.S. Senate Finance Committee considering funding a $35 billion expansion of the State Children’s Health Insurance Program (SCHIP) by increasing the federal excise tax on cigarettes by 156 percent, The Heritage Foundation found that 9 million additional smokers would be needed to fund the SCHIP program over the next five years, and that 22.4 million additional smokers would be required to fund the program by 2017, according to a press release from Reynolds American Inc.

“Proponents of this tax aren’t comfortable acknowledging that government makes more money from the sale of cigarettes than any entity actually engaged in the tobacco business,” Tommy J. Payne, executive vice president of public affairs for Reynolds American, said in a press release. “They are equally uncomfortable acknowledging this tax will primarily hit low- and middle-income individuals, and that in order to generate the revenue they want to expand this government program, they need people to smoke.”

Heritage released its findings on July 11. “Policy makers will somehow need to recruit new smokers if they insist on using the tobacco tax revenue to support SCHIP at proposed funding levels over the long term,” wrote Heritage Foundation authors Michelle C. Bucci and William W. Beach.

To highlight those findings, Reynolds American ran an ad in Washington newspaper Roll Call yesterday with the headline “Congress Needs You to Smoke.” 

“This is the latest example of government tossing any semblance of fair tax policy out the window,” Payne said. “Congress is turning a blind eye not only to who really pays cigarette taxes, but how much they are already paying.”

Payne continued, saying that more than half the price of a pack of cigarettes already goes to the government. “Smokers paid nearly $33 billion in taxes and settlement payments in 2006. Keep in mind that the median household income for smokers is less than $34,500. Congress should recognize that using cigarette taxes to expand a government program like SCHIP is a classic definition of bad public policy.”