Tobacco Tax Loophole Diverted Funds From Children’s Health Care
A loophole in tobacco taxes that fund an expansion of the Children's Health Insurance Program has cost the program $250 million in its first year, the AP/Boston Globe reports (Apuzzo, AP/Boston Globe, 6/3).
Last year, President Obama signed into law a bill (HR 2) that reauthorized and expanded CHIP to an additional four million children. Under the law, children in families with incomes of up to three times the federal poverty level now qualify for the program.
The law requires states to offer dental coverage through CHIP and allows them to extend dental benefits to children who have private coverage that does not include dental coverage.
In addition, the measure requires states to provide equal coverage of mental and physical illnesses under CHIP. The law also eliminates a five-year waiting period before documented immigrant children and pregnant women can be eligible for the program.
The law will provide coverage for the additional four million children by 2013, while continuing coverage for seven million children already in the program (California Healthline, 2/5/09).
Tobacco Tax Loophole
However, a loophole in the tobacco tax code intended to fund the expansion permitted companies to re-label loose rolling tobacco -- which is taxed at $24.78 per pound -- as pipe tobacco, which is taxed $2.83 per pound.
Daniel Morris of the Oregon Department of Health identified the loophole last year. Morris noted that the loophole is also affecting states because they base their taxes on wholesale tobacco prices, which include federal taxes.Although the Obama administration last year said it would issue new rules for distinguishing between roll-your-own and pipe tobacco, it has yet to do so. A bill (HR 4439) introduced by Rep. Steve Cohen (D-Tenn.) that would close the loophole also has stalled (AP/Boston Globe, 6/3). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.