Heat On Smokers

Supporters: Tobacco tax hike will pay for needed children’s health program Opponents: Measure would hijack state’s constitution

Few ballot measures in Oregon history have generated as much sound and fury as Measure 50, the proposal to jack up the tobacco tax to finance a new children’s medical insurance program.

Opponents — backed by big tobacco companies — have kicked in a record $9 million-plus to defeat the referendum, flooding the television airwaves with ads decrying the measure as an attempt to hijack the state’s constitution.

Supporters, though far less well-heeled with less than $2 million in contributions, have been no less passionate in their defense of the proposal, accusing Big Tobacco of attempting to hijack the state’s political process.

What it would do

Simply put, Measure 50 is the funding mechanism for a package of health care programs authorized by the last Legislature, primarily the Healthy Kids Program. If the measure fails, the Healthy Kids Program will not go into effect.

Measure 50 would amend the state constitution to impose a tax of 84½ cents on each pack of cigarettes sold in Oregon. The current state tax is $1.18 per pack, so Measure 50 would raise the total to $2.02½ per pack. There’s also a federal tax of 39 cents, meaning Oregon smokers would pay a total of $2.41½ in taxes on every pack of cigarettes they buy.

Taxes on other tobacco products would also increase under the measure, from 65 percent of the wholesale price to 95 percent, so people who smoke pipes or cigars, chew tobacco or dip snuff also would feel the pinch at the cash register.

About 70 percent of the new cigarette tax would go to the Healthy Kids Program, a plan to provide health insurance to children from low- and moderate-income families. Around 18 percent would go to the Oregon Health Plan, the state’s safety net medical plan for the poor, and the remainder would be divvied up among tobacco-use reduction efforts, rural health initiatives and safety net programs for children.

The tax increase on other tobacco products would be split between anti-smoking initiatives and the Oregon Health Plan. Measure 50 would not significantly change the distribution of current state tobacco taxes, which go to the Oregon Health Plan, the state general fund, the Department of Transportation and local governments.

Healthy Kids would use the new state tobacco tax money and federal funds (from Medicaid and the state Children’s Health Insurance Program) to provide fully paid health insurance for children whose families earn no more than twice the federal poverty level. That works out to $34,340 a year for a family of three. Children in families earning up to three times the poverty level, or $51,510 a year for a three-person household, would be eligible for subsidized coverage on a sliding scale through the state Office of Private Health Partnerships.

About 100,000 currently uninsured Oregon children would be eligible for health coverage under the program. If additional money is raised by the new cigarette tax after fully funding Healthy Kids, some of it could be used to expand Oregon Health Plan coverage to an additional 10,000 low-income adults.

Proponents argue that Measure 50 is a fair and sustainable way to provide access to health care for 100,000 uninsured Oregon children.

Opponents contend it’s a regressive and discriminatory sin tax that would fall short of the funding requirements for a program we don’t need in the first place.

Arguments in favor

State Rep. Sara Gelser, a Corvallis Democrat who co-sponsored Healthy Kids legislation in the House, says she hesitated to propose a referendum to amend the Constitution. But after what she calls “partisan games” narrowly defeated the proposal in Salem, she decided to back Measure 50.

“We need Healthy Kids because 12½ percent of Oregon children don’t have access to health care because they don’t have insurance,” Gelser said.

She dismisses the argument that many of those children should be covered under the existing state Children’s Health Insurance Program, which provides federal money to states. The federal contributions, she noted, require state matching funds, and Oregon doesn’t have enough in the budget to take full advantage of SCHIP. (While President Bush has vetoed a proposed expansion of SCHIP, a scaled-back reauthorization bill is expected to pass.)

“In Oregon we turn away thousands of dollars in SCHIP funding every year because we don’t have the match,” Gelser said.

Healthy Kids would also rely heavily on SCHIP’s matching funds. If Measure 50 passes, Gelser argues, it will bring in enough in cigarette taxes to take full advantage of the 2-to-1 federal match.

And Gelser insists that, contrary to what detractors say, Measure 50 will generate enough revenue to fully implement Healthy Kids — even though the hefty cigarette tax hike and the anti-tobacco programs it will support are expected to further drive down the already shrinking number of smokers in Oregon.

“The tobacco tax isn’t the only piece that’s funding the program,” she said.

In addition to the SCHIP money, Gelser argued, the program will generate some of its own income through partial insurance premiums paid by moderate-income families and full premiums paid by families who don’t qualify for the subsidy. The more people in the insurance pool, she said, the lower the premiums, making the plan attractive to a broad range of people and helping assure a steady income stream even as cigarette sales slump.

She also insists the cigarette tax is fair.

“We know that smoking drives up health care costs, so it’s appropriate to use a smoking tax to cover health care,” she said. “I don’t understand why we would punish a 4-year-old for a choice their parents made.”

Arguments against

FreedomWorks, a national small-government advocacy group founded by former members of the Reagan Cabinet, is one of many organizations that filed arguments against Measure 50 in the Oregon Voters’ Pamphlet for the Nov. 6 election.

Russ Walker, who runs the group’s Oregon office, said FreedomWorks has not received any tobacco money to campaign against the measure, although its interests frequently align with that industry’s and it has received financial support from cigarette manufacturers in the past.

Gelser and Walker presented the opposing sides of the Measure 50 debate at a League of Women Voters forum in Corvallis this week.

While FreedomWorks and its 30,000 Oregon members do object to a massive cigarette tax hike, Walker said, they also harbor grave concerns about the Healthy Kids Program.

“We have a deep philosophical difference on this policy and how we should fund it,” he said.

Walker called Healthy Kids a “poorly conceived” plan that provides taxpayer-subsidized health care to people who can afford to pay their own way and unfairly competes with private insurers.

“Even though the end goal of providing health care to kids is a noble one, we don’t think this is the best way to do that,” Walker said. “We think the way to do that is through the marketplace.”

Besides, he said, there’s already a government-subsidized health insurance program for the poor — SCHIP. According to Walker, 120,000 Oregon children qualify for coverage under that plan, but only 60,000 have been enrolled. Healthy Kids would undermine that program while creating yet another inefficient government bureaucracy.

“That’s what the Healthy Kids Program is,” he said. “It’s an expansion and duplication of the federal SCHIP program.”

The real problem with health care isn’t access but cost, he argued, and what’s needed is a holistic approach that would include limits on malpractice awards, elimination of excessive coverage requirements, and incentives to reduce unnecessary tests and procedures.

He called the Healthy Kids Program “a Band-Aid on a sucking chest wound” that not only would do nothing to resolve the health care crisis but would unfairly pick on a small group of taxpayers — smokers.

“I just think it’s fundamentally unfair, what they’re trying to do here,” Walker said. “They found a minority they could beat up on and picked that for their funding source.”

Robert Barrus agrees.

The 46-year-old Corvallis resident, who stopped by the Washington Street Liquor Store Friday afternoon to buy cigarettes, said he’s voting against Measure 50 because he’s tired of laws that pick on smokers.

“They want us to quit smoking, but then they want more money from us. I think they should target something everybody has to pay,” Barrus said.

“If they want to tax something, they should tax candy bars — kids eat those.”

Voters caught in bidding war

The record amount of money being spent to defeat Measure 50 makes this election something of a referendum on campaign finance. But will the mutlimillion-dollar TV advertising blitz guarantee victory or spark a voter backlash?

With ballots just beginning to arrive in voters’ mailboxes, the No on 50 forces have already brought in close to $10 million, almost all of it from large tobacco companies, according to reports filed with the state Elections Division. The measure would be funded by an 84½-cent-a-pack cigarette tax hike and a hefty increase in taxes on cigars, snuff and other tobacco proucts.

By contrast, the backers of Measure 50 — which would provide subsidized health coverage to uninsured children — have raised less than $2 million to date.

Veteran campaign watcher Bill Lunch, who heads the political science department at Oregon State University, said he expects Measure 50 opponents could boost their total spending to defeat the proposal into the $12 million-$15 million range before the election ends on Nov. 6, bankrolling a last-minute advertising onslaught to win voters to their cause.

The spending levels have already eclipsed the previous record, Lunch said. In 1992, Portland General Electric ponied up a little less than $6 million to defeat a ballot measure that would have shut down the utility’s Trojan nuclear power plant near St. Helens. Less than a week after winning that election, PGE mothballed the reactor because of radiation leaks.

“We’re out beyond the orbit of Pluto here — we’ve gone into outer space in terms of contributions and expenditures,” Lunch said. “We’ve never seen anything like this.”

Money definitely talks in ballot measure campaigns, Lunch said, but it doesn’t always win. In 1996, tobacco companies spent nearly $5 million to oppose Measure 44, a cigarette tax increase earmarked for the Oregon Health Plan. That effort failed, despite a big lead in the spending race.

On the other hand, Lunch noted, proposed cigarette taxes last year in California and Missouri were swept away in a deluge of advertising bankrolled by tobacco interests.

“The proponents of Measure 50 are not completely toothless,” Lunch said.

Their $2 million war chest, he noted, is well above average for ballot measure advertising.

“It’s just that they happen to be up against big tobacco, which has an essentially unlimited budget for this sort of thing.”

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