It seemed reasonable, then, that the Clinton administration should ask the industries that peddle cigarettes and alcohol to help pay for health reform. From the outset, Clinton has called for higher taxes on tobacco, and most White House aides assumed that alcohol would be hit as well in a new “sin tax.”
They underestimated the power of the sin lobbies. When Clinton gave his speech last week, tobacco was the only vice he singled out for a tax hike; there was no mention of alcohol. The maneuvering over sin taxes shows how difficult it will be for Congress to finance health care with tax increases, even from the most obvious targets.
Clinton’s health team figured that it would need to raise at least $100 billion from sin taxes. If cigarettes alone bore the burden, that would mean an increase of about $1.20 a pack. Last summer healthcare czar Ira Magaziner began talking up a tobacco tax. Meanwhile, Clinton was desperately trying to round up votes for his economic plan. Among the many deals he cut: if the Democratic lawmakers from North Carolina agreed to vote “aye,” the White House would not pick on tobacco as the sole source of revenue for its healthcare program.
On July 19 Clinton was reminded of his “promise” in a letter from Rep. H. Martin Lancaster of North Carolina. If “Magaziner continues to insist on tobacco as the sole source of revenue,” Lancaster warned, “the White House should not expect to ever again get that kind of support from our delegation.” He asserted that “alcohol creates as many health problems as tobacco.”
So why not tax booze as well as butts? White House officials began hinting that bard liquor (but not beer or wine) would join tobacco on the hit list. That suggestion provoked an angry letter to the president on Sept. 2 from Fred Meister, the head of the Distilled Spirits Council of the United States. Noting that “beer, not liquor, is the beverage of choice among the young and drivers,” Meister asked why his product was being unfairly targeted. The beer lobby struck back. “I am appalled by your letter to the president,” Ronald Sarasin, head of the National Beer Wholesalers’ Association, wrote Meister. He accused the liquor lobby of picking up “the shrill mantra of the neo-prohibitionists.”
What was the White House to do? Taxing wine was out of the question. California has 54 electoral votes, and Clinton can forget about re-election in 1996 without them. Nor, for that matter, could he afford to alienate “Joe and Jane Sixpack,” his political advisers warned, by raising the tax on beer. It didn’t hurt the beer lobby that the headquarters of Anheuser-Busch, makers of 44 percent of all the beer sold in the United States, is located in the St. Louis district of House Majority Leader Richard Gephardt.
So it was back to booze. Until Senate Majority Leader George Mitchell told Clinton that he could not afford to single out one alcoholic drink. Mitchell is “pretty well respected as a good guide as to what will fly on the Hill,” explained a senior White House official. (One of Mitchell’s closest Hill allies: Sen. Wendell Ford of Kentucky, home of Southern Comfort, Wild Turkey and Early Times.) Whoops. Maybe tobacco was a better bet after all. But what to do about Clinton’s original promise to the North Carolina delegation? As the deadline for the big healthcare speech approached, the White House equivocated. Pressed on the sin-tax question, Deputy Treasury Secretary Roger Altman quipped, “The president’s upstairs having a drink and a cigar and will make that decision shortly.”
It wasn’t until the day of the speech that Clinton decided-with a characteristic fudge. Butts yes, booze no. But to reassure tobacco-state lawmakers that they were not alone on the sacrificial altar, the president suggested that large corporations that opted out of the federal health plan would also be hit with a payroll tax of up to I percent. Privately, White House aides suggested that cigarettes would go up only less than $1 a pack, raising perhaps $65 billion. Corporations would pony up an additional $30 billion or so. White House aides conceded that in the end Congress might not vote to raise the $105 billion in new revenue that Clinton says is necessary to achieve deficit reduction as well as health reform. In that case, they said, Congress, not the president, would be to blame.
