Mr. Chairman, thank you for yielding time.  We are here today to investigate the magnitude of the problem posed by evasion of federal excise taxes on tobacco.   It goes without saying that the smuggling of cigarettes to avoid federal taxes is wrong.

It was also wrong of Democrats to inadequately fund the children’s health insurance program with these taxes.  Cigarette taxes are an unstable source of financing.  The higher taxes Democrats imposed – which fall hardest on low-income Americans – ultimately cause tax collections to diminish.  That is both because smoking rates go down as people cannot afford to pay the higher taxes and, as the Treasury report indicates, we see an increase in black market sales to avoid these higher taxes. 

Whatever one thinks of the merits of last year’s SCHIP expansion, the first piece of legislation passed by this Congress and signed by President Obama that affected the federal budget, it provided the template for how the Democrats would handle budget-related legislation throughout the 111th Congress.  Specifically, their model calls for:

1. Increasing taxes,
2. Increasing spending by even more,
3. Increasing the national debt to make up the difference, and
4. Using budget gimmicks to make such legislation appear to comply with PAYGO requirements.

I look forward to hearing from the witnesses what we can do about tax evasion, but I am more interested in ensuring we get rid of the budget gimmicks that will soon force millions of children off the CHIP program.

Time and time again we’ve seen this fiscal chicanery from the Majority.  We saw it in their government takeover of health care, and this week we see it in their so-called extenders bill, which I believe should be called a “deficit extender” bill. The fact the Majority is claiming that the extenders bill is PAYGO-compliant, even as CBO says it will increase the deficit by $84 billion, would make George Orwell proud.  What we see in the extenders bill is a repeat of what we saw on SCHIP: more taxes, more spending, more budget gimmicks, and more debt heaped on our children and grandchildren.

At the end of the day, Mr. Chairman, government spending cannot occur without either higher taxes or more borrowing.  I like neither so I agree we need to be sure taxes owed to the government are not avoided, whether in the context of tobacco smuggling in the case of SCHIP or in the context of any other portion of our tax code.

Mr. Chairman, I look forward to the hearing today and to learning more about how to combat tobacco smuggling and tax avoidance. 

Thank you, Mr. Chairman.  I yield back.

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