Anti-Tobacco Bill Heads for Senate Floor

Despite intense tobacco industry lobbying, the Senate Finance Committee sent to the floor for debate next week a tough anti-smoking measure that would slap a $1.50-a-pack tax on cigarettes in three annual 50-cent steps.

By a surprisingly strong, bipartisan 13-6 majority, the committee voted to substitute its $1.50 tax for the $1.10-a-pack price increase over five years that the Senate Commerce Committee approved in March.

Senators are expected to try to make the overall bill still tougher during floor action next week, and a free-for-all is likely over how to spend the $135 billion that the measure would raise over the next 10 years.

The full Senate will have to vote on whether to accept the higher tax before it officially becomes part of the bill.

“I believe that we’ve got a filibuster-proof majority working in the Senate to accomplish our goals,” said Senate Minority Leader Tom Daschle (D-S.D.). “We disagree on the pieces to it but there is no disagreement that we’ve got to move the bill forward.”

Other supporters tempered their optimism. “We’ve got a long way to go. It’s going to be tough,” said Sen. John McCain (R-Ariz.), chairman of the Senate Commerce Committee and primary author of the legislation.

But McCain was grinning as he spoke, excited that after a week of infighting among his Republican colleagues about whether to push ahead on the sweeping measure, he won.

Public health groups predicted that support for the bill is building. “There’s no going back,” said Matthew Myers, general counsel for the National Center for Tobacco-Free Kids.

However, it is still relatively early in a long legislative process. In addition to disagreement over how to spend the money raised by the bill, fights also are expected on such issues as how much the trial lawyers who represented the states in their pivotal lawsuits against the tobacco companies should be paid.

Also at issue is how much the tobacco industry will be penalized if teen smoking fails to drop to the levels specified by the legislation and whether the tobacco industry should receive special legal protections.

McCain is in the midst of negotiating with the White House and senators of both parties a massive amendment with changes to the bill that are designed to please as many parties as possible. One change would raise from $6.5 billion to $8 billion the annual limit on settlements and judgments tobacco companies would pay in lawsuits brought by smokers.

It is not yet clear that the Finance Committee’s $1.50 per-pack tax increase will stick on the Senate floor.

According to a new analysis by Congress’ nonpartisan Joint Tax Committee, the price increase actually would reach $1.84 a pack after 10 years because the increase would be indexed for inflation. Together with a 20-cent increase in the federal cigarette tax passed last year, the average price of a pack of cigarettes would reach more than $4 a pack over the next 10 years.

Although the White House previously had praised the Commerce Committee bill, which boosted the per pack price by $1.10, Chief of Staff Erskine Bowles appeared to indicate Thursday that the administration could support a larger increase.

“If it is $1.50, hopefully that will cause less kids to smoke and that will be good,” Bowles said after meeting with Senate Democrats.

The bill’s prospects are cloudy in the House, where the Republican leadership has not produced even the outlines of a tobacco bill.

“There’re a lot of conversations but I think it is fair to say there’s nothing close to any consensus or direction as of yet,” said GOP Conference Chairman John A. Boehner (R-Ohio).

Much of the uncertainty in the House stems from lawmakers’ fears that in November’s elections there could be a backlash to a large tax increase.

“There are a lot of folks in this conference that have taken the ‘no new taxes’ pledge,” said Rep. John Linder of Georgia, chairman of the National Republican Congressional Committee, which raises campaign money for GOP House members.

The tobacco industry sharply criticized the Finance Committee’s action Thursday and predicted that consumers would rebel.

“Today’s action is final proof, if any were needed, that this is just about money,” said Steve Duchesne, an industry spokesman. “As far as I know it’s the largest single tax on a consumer product in history.”

The Finance Committee’s debate over the tobacco bill reflected the multitude of views within both parties on the legislation. Startlingly, a majority of members, led by Republican Orrin G. Hatch (R-Utah), usually a passionate proponent of tax cuts, removed from the bill a proposal to make health insurance fully tax deductible for the self-employed immediately and to give other health-related tax cuts.

That move raises questions about whether there will be support in the full Senate for using revenues from a tobacco tax increase to pay for a tax cut, which conservative Republicans say they want.

Sen. John H. Chafee (R-R.I.) led the fight to increase the per-pack cigarette tax to $1.50 in committee, but he lost by one vote and then joined with Democrats as well as two other Republicans on another amendment that had much the same effect.

Sen. Alfonse M. D’Amato (R-N.Y.) who is up for reelection in November, successfully pushed to get in to the bill a measure to require health plans to provide coverage for hospitalization for women who have mastectomies.

Reflecting the unique nature of the tobacco legislation, Clinton Stretch, director of tax policy for the accounting firm Deloitte & Touche, said: “The politics of this are entirely the politics of tobacco and not the politics of taxes. If you think that the tobacco companies have been trying to poison your children, then a $1.50 tax increase doesn’t seem too high. But if you’re a senator with a lot of tobacco farmers in your state and you think people buy cigarettes of their own free will, then a $1.50 tax is outrageous.”

Stretch noted that the $1.50 increase would mean that for a middle-income parent who smokes a pack a day, the tax would “burn up in smoke” the $500-per-child tax credit that Congress passed for middle-income taxpayers last year.