Tobacco Documents Online

1% = STATEMENT OF CONGRESSWOMAN EVA CLAYTON BEFORE THE HOUSE WAYS AND MEANS COMMITTEE November 18, 1993 I want to thank the distinguished Chairman of this Committee for allowing me this opportunity to address the Members of Ways and Means Committee about the subject of financing health care reform. I am very pleased with the Administration's commitment to insuring access to quality health care to all Americans. This commitment poses great challenges and opportunities to us in Congress - What is the most effective way to deliver quality health care to everyone and How do we pay for this care? The challenges are great and in order to succeed in providing quality health care to everyone, we need to establish a sound and responsible means of fmancing health care reform. Given this need, I implore the Ways and Means Committee to look critically upon the Administration's proposal which depends upon a large increase in the tobacco tax to fund a significant portion of health care reform. Relying largely on tobacco tax is not only unfair, but irresponsible and unwise. The Administration talks about "sin taxes", but so far they have only isolated our tobacco farmers - they have not spread the burden around to alcohol, firearms, pollution - all the many other factors in our society that have major implications on our health. The tobacco tax is irresponsible and unwise because - using the charts prepared by the Administration - the tax does what it is intended to do - it reduces the consumption of tobacco products. Thus, the revenues generated by the tobacco tax, decline every year from 1995 to 2000. Mr. Chairman, I also would like to appeal to the Committee's sensibility in viewing this industry as a way of life for thousands of working men and women across the Southeast region. The tobacco farmers in my district are the backbone of our rural communities. Increasing the tobacco tax will displace thousands of small farmers and workers. The Federal government needs to take some responsibility for this action. If the purpose of this increased tax is to halt production of tobacco products, the Federal government needs to stand by these tobacco farmers and provide assistance to them in their transition. It is estimated by Price-Waterhouse that the tobacco industry represents a total economic value of over $7.4 Billion to the state of North Carolina. This includes all of the various facets of the industry including growing,

manufacturing, and distribution. Over 260,000 jobs in our state are tied into this industry, representing 7.5% of the state's total workforce. In my First Congressional District, our farmers grow more flue-cured tobacco than any other congressional district in the entire nation. For our state, tobacco growing accounts for $1.1 BILLION at the farm level. This compromises between 20-23% of our total farm income in North Carolina. Despite the troubles experienced by small farmers all over this country, tobacco farmers continue to support themselves with relatively small allotments. Put simply, there is absolutely no replacement in cash value for tobacco. With the economic reality of states like North Carolina in mind, let me give you some real statistics to consider concerning the evolution of the excise tax on tobacco products. Since 1982, the federal excise tax on cigarettes has increased from 8 cents to 24 cents per pack, representing a 200% increase. Since 1982, the Consumer Price Index has increased by 47%. With the hope of partially financing the cost of long-term health care reform for the United States, I submit to this Committee that tobacco is NOT a reliable source for two primary reasons: 1) Tobacco, like any other product, can be taxed beyond "diminishing returns." 2) Tobacco consumption continues to decline in the United States. It is one thing to desire a healthy America and another to depend on a declining industry to finance a new health care system. Using the numbers from the Administration's proposal - the tobacco tax is expected to bring in $12.3 billion in 1995 and only to $10.1 billion in 2000. These numbers illustrate that this particular industry is unable to provide the needed resources over the years for health care reform. In light of the difficult tax battles that have been fought in the recent past, I urge the Committee to not make a mistake in depending on an industry like tobacco to help fmance health care reform. If you levy the proposed tax on tobacco today, you will certainly revisit this same question of generating additional revenues in the near future. And in the meantime, an industry which makes up the foundation of my state's economy will have received a dreadful blow. Hundreds of small farmers will face disaster. While I have the Committee's attention, I would also like to mention briefly my concern for the large cuts the Administration is proposing in the Medicare and Medicaid programs. I am concerned that in limiting the : funds to these programs, the senior citizens and poor families that rely upon them for medical assistance will be unable to receive health care in the future.

I want the Committee to remember the hard time we had this summer trying to come up with cuts in these programs during our Budget Reconciliation negotiations. The cuts that the Administration proposes are much deeper than what we tried to do earlier -- and may be impossible to meet. The cost of providing senior citizens quality health care has driven the costs of Medicare through the roof. The cost of providing health care for our seniors is much higher than the cost of health care for our children. We do not have the experience which will assure us that we can make the cuts to Medicare that the Administration is assuming. I support the additional benefits for the Medicare population, however, we need to be very cautious in assuming that our savings for Medicare and Medicaid can actually be achieved. If we are not able to attain these savings, we will place in jeopardy the delivery of health care to our seniors and poor families. I respect the responsibility that lies before this Committee. Health Care Reform is a necessity - but we need to insure that we have a very sound and wise plan to pay for health care reform. We cannot let health care reform fail because we failed to fmance it properly. Increasing the tax on tobacco products and making drastic cuts in programs that provide medical assistance to low income families is not a sound base for financing health care reform. I submit instead that the Committee consider more progressive means of financing health care reform. For example, instituting a 3 percent value-added tax on non- essential consumer items could raise $130 billion over 5 years. Or if the Committee were to look further at sin taxes - you will find that imposing a tax on various air pollutants could raise-over $300 billion over five years, and a $16.00 per proof gallon tax on all alcoholic beverages could raise $22.6 billion over five years. I do not propose that if the Committee elect to use sin taxes as a way to finance health care that tobacco not be included. Rather, I argue that the level of the tax must be deeply reduced and that other "sins" in our society be made to share the burden with our tobacco farmers. I urge this Committee to be fair and appropriate in their taxing policy. It is crucial that what we are offering to the American people - universal access to quality care - we deliver. Therefore, we need to propose a sound and responsible way to finance this reform of our health care system. There will be some tough decisions, but providing a progressive means of financing health care will insure that we have a secure health care delivery system for generations to come.