Raleigh Health Plan Backed By Kay Hagan Despite Tobacco Tax Increase

Wednesday 28th January 2009

Wednesday, January 28, 2009
RALEIGH, N.C. - North Carolina Sen. Kay Hagan said Wednesday she favors an expansion of children's health insurance over a cornerstone industry in her home state as Democrats prepared to approve a sharp increase in cigarette taxes.

The bill set for final approval on Thursday would raise the federal tax on a pack of cigarettes from 39 cents to $1 - a jump of about 150 percent. In perhaps her first key vote representing North Carolina since joining the Senate earlier this month, Hagan told colleagues on the floor of Congress that the tobacco tax was "outrageous" and unfairly placed the burden on the backs of one industry.

Hagan conceded she wasn't willing to vote against a plan that supporters estimated could cover an additional four million low-income children under the State Children's Health Insurance Program.

"My vigorous support of this program itself does not mean I approve of the way that this expansion is being funded," Hagan said. "I vehemently believe that the increase in the tax on cigarettes that this bill includes is regressive and patently unfair for states like North Carolina."

Such a vote from Hagan marks a stunning shift for North Carolina's tobacco industry, which had long leaned on local lawmakers to prevent taxes from draining money from both businesses and their consumers. Hagan herself acknowledged that the tobacco tax increase could cost the state 3,000 jobs and up to $36 million inrevenue shortfalls.

About 65,000 people in North Carolina have jobs connected to the tobacco industry, Hagan said.

Graham Boyd, executive vice president of the North Carolina Tobacco Growers Association, said he was concerned Hagan was voting for a tax increase. He questioned whether Hagan was simply going to vote in line with her Democratic superiors instead of in the interest of the state.

"I would hope that she would stand by the principle of logic and tax fairness," Boyd said. "I'm concerned that we're going to make tobacco purchasers foot the whole bill." For the same reasons, Hagan's predecessor, Republican Sen. Elizabeth Dole, voted against a similar measure when it passed in 2007. Former President George Bush twice vetoed that bill. President Barack Obama has now urged lawmakers to send him the bill so he can sign it.

Hagan backed an amendment that she said would be more beneficial, but it still would have nearly doubled the cigarette tax. She also proposed spreading the cost to other products such as sodas and sweets.

Raising the tobacco tax is also not a popular issue in state government. At 35 cents, the North Carolina's tax on cigarettes is still comparatively low, and it was raised from just 5 cents in 2005 after years of grueling debate.

Democratic state Senate leader Marc Basnight has suggested raising the cigarette tax to help close a likely revenue hole for next year's budget. But his idea hasn't yet gained traction in the Legislature, which began this year's session Wednesday. It also wouldn't generate that much additional money unless the current tax was raised significantly.

North Carolina's other senator, Republican Richard Burr, plans to vote against the children's health bill, saying the expansion was going too far in qualifying people who are not needy.

"This is another attempt to grow the sizeof a federal government program to include more Americans in it without taking on the tough task of debating: 'How in the hell do we fix health care in this country? And what are the reforms that have to take place so every American has the opportunity to be insured?'" Burr said.

Burr noted that lower-income individuals share a greater burden of cigarette taxes.

"So, in essence, we are not spreading this across taxpayers," Burr said. "We are asking the parents of these children to pay for the expansion in eligibility because we are going to tax them for every cigarette they buy and consume."

North Carolina is the nation's largest producer of flue-cured tobacco, and farmers had cash receipts of nearly half a billion dollars from tobacco in 2006.

The Associated Press

Jan 28, 2009 - 7:20 p.m. EDT
Copyright 2009, The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.