Hypothetical Mean

Commentary from an Actuarial and Economic Perspective

Concord Coalition on SCHIP

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I just ran across this excellent Concord Coalition analysis of SCHIP funding proposals. They brought new information to bear on two points.

First, the funding for SCHIP runs for 5 years, after which it “sunsets” and has to be reappropriated. Unlike the CC, I don’t view this as a bad thing. However, this version is additionally cynical because it provides for a one-time special appropriation in 2012. This appropriation is not scored as an expenditure by the CBO.

Second, the use of the cigarette tax to raise offsetting revenue is an especially poor vehicle. SCHIP expenses are likely to increase faster than the rate of inflation and for as long as the eye can see. Cigarette taxes will fund the program. But as their graphic (reproduced below) illustrates, cigarette tax revenue tends to decline over time, not increase.

Cigarette Tax Revenue

Combined, these two political gimmicks suggest that the bill builds in unfortunate long-term funding imbalances.

Smoking and low income status are correlated.  Therefore, this bill brings up an additional oddity.  It taxes the poor in order to give the poor some financial protection.  A noble sacrifice.

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Written by Victor

September 28, 2007 at 3:29 am

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