McCain Drops Smoke Tax

Posted August 8, 2008 at 4:19pm

The campaign of presumptive Republican presidential nominee Sen. John McCain (Ariz.) is declining to embrace McCain’s own 1998 tobacco bill, legislation that would have raised taxes to the tune of $516 billion over 25 years.

The bill, among the decade’s major pieces of legislation, would have amounted to one of the largest tax increases in history. It died on the Senate floor after backers fell just three votes short of the 60 needed to overcome procedural hurdles.

McCain, whose credentials as a tax cutter are suspect among many on the right, was the author and driver of the bill. Even so, leading conservatives today are generally willing to forgive the Arizona Senator for what they view as his transgression on the tobacco measure.

The bill would have forced tobacco companies to pay for a host of anti-smoking initiatives and fork over huge sums to the states in return for settling a lawsuit by the states. Cigarette makers would have been required to raise prices by about $1.10 per pack to come up with the money, according to a Congressional Research Service report from the time.

Asked repeatedly last week whether McCain still backs the bill and if he thought it was a good idea, senior adviser Douglas Holtz-Eakin declined to answer directly. But he noted that some of the aims of the legislation did not pan out as hoped for after the tobacco industry and the states settled on their own. To the disappointment of anti-smoking activists, the states have frequently used their take on a variety of priorities unrelated to health and preventing teen smoking, as supporters of the suit intended.

McCain is “very disappointed with the way it played out,” said Holtz-Eakin, who also argued that the primary purpose of the legislation was to settle the lawsuits and “get some certainty.”

The bill “was multidimensional,” Holtz-Eakin said. “We can’t turn back the clock” and “take a bill from that era and put it in modern times.”

And McCain today does not support raising taxes on cigarettes, his adviser said.

But McCain himself raised questions among conservatives about his commitment to keeping a lid on taxes when he said two weeks ago that “nothing’s off the table” in answer to a question about whether he would raise payroll taxes as part of a Social Security fix. Aides have suggested that the Senator merely recognizes that the issue has to be approached without preconditions.

A Wall Street Journal opinion piece a few days later derided “McCain’s tax blunder” and asserted, “Such mistakes also help explain the continued lack of enthusiasm for Mr. McCain among many conservatives.”

In addition to the $516 billion, the tobacco legislation would have presumably raised prices further by disallowing the tax deduction for tobacco advertising and marketing. An amendment added on the Senate floor would have mandated billions more in penalties if the companies failed to reduce underage smoking by specific targets over 10 years.

The Food and Drug Administration would also have been put in charge of regulating tobacco.

With smoking more prevalent among lower-income earners, the bill would have amounted to a massive regressive tax, albeit one designed to help many of those who would have to pay it.

Most conservatives vociferously opposed the legislation, viewing it as a major government money grab designed to expand the scope of the “nanny state.” But today, most are willing to ignore McCain’s stewardship of the measure in the interest of defeating presumptive Democratic presidential nominee Sen. Barack Obama (Ill.).

“The movement conservatives on the fiscal side have not forgotten about the tobacco tax proposal, but they’re willing to put it aside for the greater purpose of this election,” one leading conservative strategist said. “There are a number of things in McCain’s record — including the tobacco bill — that give conservatives pause, but given the choice between McCain and Obama, it’s not a close call.”

Longtime conservative leader Paul Weyrich said he did not expect the tobacco bill to become an issue, noting efforts to “paper over” differences between McCain and conservatives, as well as the candidate’s promise not to raise taxes.

“I’ll take him at his word,” Weyrich said.

Americans for Tax Reform President Grover Norquist noted that the 1998 tobacco bill was made less objectionable by its limitations on fees for lawyers suing the industry. He said that consumers hit with the new taxes would also ultimately have benefited from the lower payments being made to the attorneys.

Norquist said he was “comfortable” with McCain’s repeated assertions that he will not raise taxes.

A spokeswoman for the Club for Growth said its president, former Rep. Pat Toomey (R-Pa.), views the tobacco bill as a “drop in the bucket.” He too has accepted McCain’s promise not to raise taxes.

Still, others are not assuaged. The Heritage Foundation’s Dan Mitchell, a leading conservative tax expert, said he harbors concerns not only about the tobacco bill but even more so about McCain’s opposition to President Bush’s tax cuts of the early part of this decade.

The “intervention, meddling and control in people’s lives” that the tobacco legislation would have promoted was also worrisome for Mitchell.

“The government was going to come in and seize a bunch of money because of politically incorrect behavior,” he said.

Holtz-Eakin argued conservatives have a GOP standard-bearer they can get behind.

“Conservatives should be delighted that they’re finally going to have someone who will control spending,” Holtz-Eakin said.