WASHINGTON -- The U.S. House's failure Thursday to override President George Bush's veto of tobacco tax hike legislation is a break for the tobacco industry, but it's not out of the woods yet. House Speaker Nancy Pelosi has promised to have the same bill back on Bush's desk within two weeks.
The bill would increase federal tobacco excise taxes the equivalent of 61 cents per pack of cigarettes. The $35 billion raised by the tobacco tax increase over five years would have offset the cost of expanding the State Children's Health Insurance Program. [image-nocss] The bill's supporters said that by 2012, the expansion would have allowed the program to cover nearly 10 million children.
Asked whether the bill might include an alternative funding source, Pelosi said simply, "no," according to a Dow Jones report.
Bush vetoed the bill on Oct. 3, as previously reported by CSP Daily News, arguing that it would encourage families to drop private insurance. He has offered $5 billion that would temporarily increase the number of children enrolled in the program, but would reduce enrollment over the next five years.
The House's 273-to-156 vote Thursday fell 13 votes short of the two-thirds majority needed to override a presidential veto.
J.P. Morgan's Erik Bloomquist had anticipated a 5% to 6% decline in the volume of tobacco product sales from passage of the tax, according to Dow Jones, which would have increased retail product prices approximately 15% on average, according to analysis released Oct. 3.
In that analysis, Bloomquist said J.P. Morgan now believes the risk of passage has shifted into 2008, with implementation in 2009 possible, but likely at a lower rate.
The analysis was based in part on House Republican Whip Roy Blunt's correct assessment that House wouldn't override Bush's veto.
Democratic leaders have promised to continue pressing for the bill, and Senate Majority Leader Harry Reid has said there will be no further compromise of the bill's contents.
Congressional Republicans, however, are trying to use political pressure to force Democrats to negotiate. A leading GOP proposal would increase spending on the S-CHIP program by $15 billion, but included no tobacco tax hike.
Bonnie Herzog, an analyst at Citigroup Global Markets, had predicted that an override would be difficult, but not impossible.
Still, Herzog wrote in an Oct. 3 analysis, "the President's veto ... could force Congress to draft another bill, which calls for less funding for children, and therefore could call for a less stringent (tobacco tax) increase on cigarettes."
Congressional Republicans have insisted that the bill be changed to focus benefits on lower-income children and to exclude coverage for adults.
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