Tobacco Documents Online

CONFIDENTIAL: MINNESOTA TOBACCO LITIGATION DRAFT LETTER TO HOUSE REPUBLICAN FRESHMEN You have undoubtedly been reading of proposals from various quarters that the Medicare Trust Fund be augmented by raising the excise tax on tobacco products and earmarking the additional revenue for this purpose. A bill to accomplish this has been introduced (EiR 236). We are ;ariting to call your attention to what seem to us to be serious flaws in this proposal. The Medicare Trust Fund must be maintained at a level adequate to finance this essential program. The threat that the Fund may be insolvent by 1984, which is the current projection of the Congressional Budget Office, must be averted. The remedy had been pointed out in the 1984 Report of the Medicare Board of Trustees in these words, "The Board recommends that Congress consider further action to curtail the rapid growth in the cost of the hospital insurance program which has occurred in recent years and which is anticipated in the future." We agree with this position and with that taken by the American Association of Retired Persons, which opposes any further tax increase for Medicare until the startling cost growth of the program has been brought under control. The revenue from the payroll tax now dedicated to the Hospital Insurance Trust Fund has been increasing at a rate of 8 per cent annually. This rate of increase will be higher in the future since the payroll tax for this Fund went up on January 1 of this year and will go up again in 1986. At a time when the CP:r is increasing by 4 per cent a year, it should be possible to moderate the program's cost growth and to maintain TIMN 0061417

CONFIDENTIAL: MINNESOTA TOBACCO LITIGATION Draft to House Republican Freshmen - Page 2 the Fund's sDlvency without resorting to still higher taxes. If there was any dominant issue in the 1984 campaign, it was the issue of taxes. I believe that all of us new Republicans pledged opnosition to any increase in the tax burden imposed on our constituents. The President could not have been stronger or clearer on this matter. The rationale that is offered for the proposal to levy a special added tax on smokers for Medicare is that tobacco users add disproportionately•to the costs of the Medicare program and do not contribute their share to financing the program. The first statement cannot be supported. The second is untrue. No one knows anything about the smoking behavior of Medicare patients. We do know, however, that smokers, more than 90 per cent of whom are under age 65, contribute at least $12 billion annually through payroll and income taxes to the Medicare program. If the Congress were to decide that tobacco should be subject to a special tax to finance Medicare or other health programs, how could one justify limiting the tax to tobacco? Many products pose health risks. Should we not then tax sa?t,- sugar, high cholesterol foods, coffee, tea, aspirin, automobiles, firearms, motorcycles and a long li,s.t of other things to pay for health programs? No one who supports the philosophy of the Reagan Administration can consistcntly endorse H.R. 236. Instead of meeting the budgetary problem Medicare will face a decade from now by curbing spending, it proposes to raise taxes. Instead of moving toward the goal of the TIMN 0061418

Draft to Hou:3e Republican Freshmen - Page 3 ~ O ~7CZ President's New Federalism to return the tobacco excise tax to y O ~ the states, Lt would cement this form of tax in the Federal fiscal W structure so that it could never be dislodged. O F"' The Medicare program must be maintained and any threat ~-+ of insolvenc7 avoided but not by higher taxes and particularly y.. ~ not by one as regressive as the tax on tobacco. ~ O z TIMN 0061419