Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 20, 1993 TAG: 9302200110
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
HIGHER ALCOHOL, CIGARETTE TAXES EXPECTED
Higher taxes on alcohol and cigarettes probably will be needed to pay for President Clinton's health-care reform program, White House budget director Leon Panetta said Friday."It's a little bit early to say, but I suspect that some of the sin taxes probably are going to be used for that," Panetta told the Senate Budget Committee. "Sin taxes" are taxes on alcohol and tobacco products.
Treasury Secretary Lloyd Bentsen had said Thursday that the administration was considering raising the levies on alcohol and tobacco to pay for a national health plan, but did not say whether he believed such increases would be necessary.
Higher alcohol and tobacco taxes were not among the $246 billion in revenue increases Clinton proposed this week as part of his economic recovery package.
A task force headed by the president's wife, Hillary Rodham Clinton, hopes to propose a reform package later this year.
Clinton hopes to drive down costs in the $800 billion-a-year medical system, which are rising at several times the rate of overall inflation. He also wants to extend coverage to the 35 million Americans who have no health insurance.
Panetta said some of Clinton's advisers believe the health care reform package will produce enough savings not only to expand coverage to the uninsured, but also to reduce the budget deficit. "I don't particularly share that view," said Panetta.
The budget director said he believed any savings from health care reform would "largely have to be committed to expansion of coverage of health care itself."
The Treasury Department estimated Friday, meanwhile, that Clinton's existing proposals would add $204 a year to the tax bill of a typical family with $40,000 a year in earnings.
The Treasury averages don't tell the whole story about the tax increase because they are based on a definition of income far broader than most people are used to.
For example, a family with $50,000 adjusted gross income listed on an income-tax return, living in its own home and making typical investments, might be viewed for purposes of calculating averages as having "family economic income" of $65,000.
Using the new definition of income, the Treasury estimated that when fully effective in 1997, the tax plan would reduce taxes by $12 a year for those under $10,000; make no change in the burden of those with incomes between $10,000 and $20,000, and cost the average $20,000-to-$30,000 household $24 a year.
Households in the $30,000-to-$50,000 range would pay $204 more a year. Between $50,000 and $75,000, the average increase would be $432; between $75,000 and $100,000, $588; and $100,000 to $200,000, $912.