Clinton Faces Tough Sell in Capitol On `Sin Tax' to Fund Health Plan
Tobacco lobby steps up campaign, as alcohol hike is quietly dropped
THE administration seems to be redefining ``sin.''
Initially, a major part of health-reform financing was to come from hefty hikes in so-called sin taxes on alcohol and tobacco. Then the administration revealed that it would not propose a higher alcohol tax. Instead, it would call for a payroll tax of up to 1 percent on firms that insure employees' health and opt not to join a ``regional health alliance.''
The corporate-levy issue came up last month, and President Clinton did not decide until ``a few days before'' his Sept. 22 speech to include such a tax, says Kevin Anderson, the White House health-care-reform spokesman.
Thus, the delay in a White House proposal on taxing tobacco. The administration is looking at a 75-cent-to-$1-a-pack hike above the current federal tax of 24 cents. But, Mr. Anderson says, the figure will not be set until number-crunching is finished on the corporate payroll tax. The administration wants to determine how many of the 1,600 firms with 5,000-plus employees will devise their own health-care systems.
Many large firms are self-insured on health, and so it can be estimated which ones will go for the option. Then, Anderson says, ``There's some political horse trading to be done.'' But, anticipating criticism of the payroll tax, he implies that firms that favor self-insurance should be grateful the choice remains. ``Some in the task force wanted to eliminate that option altogether,'' he says. Anderson adds that choosing the payroll tax is ``fair,'' because the new system of regional health alliances will enhance competition and drive down costs, so firms that form alliances will benefit.
The White House is counting on sin-tax revenues of $100 billion to $105 billion through 2000. But getting the threefold-to-fourfold hike in the tobacco tax will take tough slogging. Congress's Tobacco Caucus - members from the biggest tobacco-producing states - has carried on a dialogue with the White House's Health Care Task Force.
Contrary to reports, tobacco-state members say they won't settle for any tobacco-tax hike. ``It doesn't really stand the test of logic that a commodity [that] various factions are trying to get banned would be looked to to be the workhorse in the president's plan,'' says Rep. Tom Barlow (D) of Kentucky. The caucus's clout is self-evident. Producing 90 percent of the nation's tobacco are: Georgia, North Carolina, South Carolina, Virginia, Kentucky, and Tennessee. ``These are traditional strongholds of the Democratic Party,'' Mr. Barlow says.
Not only does Mr. Clinton need these congressional delegations' votes, he also needs to look ahead to 1994 congressional elections and the South's voting power in 1996 presidential elections.
IF he faces trouble over tobacco, he would have faced a larger congressional revolt if he had hiked the alcohol tax. The White House dropped the idea of higher taxes on beer and wine weeks ago, for several presumed reasons: Congress already approved a beer-tax hike in 1990, and the administration did not want to offend ``Joe six-pack.'' ``They were worried about the perception of going after the middle class,'' especially after the broken promise to cut middle-class taxes, says George Hacker, director of the Alcohol Policies Project at the Center for Science in the Public Interest.
A look at the congressional map shows another reason to back away from beer. Anheuser-Busch, the nation's largest beer-maker, is based in Missouri; that state's two GOP senators are moderates Clinton could sway on health care. He can also ill afford to lose Rep. Richard Gephardt (D) of Missouri, the House's No. 2 Democrat, after losing him on North American trade.
The wine industry is small enough to have made projected revenues not worth the trouble. California would have objected loudly, as a letter to Clinton from its two Democratic senators indicated. That left hard liquor, now the industry's most-taxed drink. Its lobby argued that higher taxes would only depress sales and cause a drop in federal revenue.
Some observers also speculate that Clinton didn't want to alienate some key Democratic contributors, such as August Busch, of Anheuser-Busch, and Edgar Bronfman, of Seagram.
For whatever reason, alcohol is off the table, so to speak - and lobbyists want to keep it there.