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CLT UPDATE
Friday, December 13, 2013
Bait-and-Switch Scam on Taxpayers Accomplished
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Tobacco taxes and the state’s annual share of a
major tobacco settlement add up to about $1 billion per year, and
none of that revenue is dedicated toward lowering smoking rates, an
anti-smoking panel told a task force Monday morning....
The presentation coincided with a report from the
Campaign for Tobacco Free Kids that accused state officials
throughout the country of being “penny-wise and pound-foolish,”
receiving $390.8 billion in tobacco revenue and $116.3 billion from
the tobacco settlement and spending only $8.9 billion on tobacco
prevention programs....
Most of the states reached a settlement with
tobacco companies in 1998, which provided for payments in
perpetuity....
[American Cancer Society Cancer Action Network
lobbyist Marc Hymovitz] said that as long as tax increases on
tobacco are significant enough, they result in less usage, in
addition to tax avoidance. He said the $1 increase, which brought
the state tax on a pack up to $3.51 would result in 27,000 less
youth smokers....
Since August, the first full month the tax was in
effect, the state has recorded fewer packs sold, and despite the
decrease in sales the cigarette tax revenue is expected to climb by
$118.5 million, with additional revenue increases from cigars, chew
and other tobacco products, Hymovitz said. He said estimates show
there will be about 27.2 million fewer packs sold in Massachusetts
in fiscal year 2014 versus fiscal 2013. There were 214 million packs
sold in fiscal 2013, and there are 6.6 million state residents.
In 1992, there were 547 million packs sold in
Massachusetts and the gradual decline has included steeper drop-offs
when the tax was increased, according to a Cancer Action Network
presentation using Department of Revenue data. In 1992, the state
tax on cigarettes was 26 cents....
Hymovitz told the News Service that New Hampshire
officials are not usually willing to collaborate with Massachusetts
on tobacco policy because an increase in Bay State cigarette taxes
is seen as a boon for the Granite State, though he said that is
usually overstated.
“Some come in from New Hampshire for personal
use,” Hymovitz said, saying the New England neighbor usually
receives a “a little bit of a bump” in revenue after a Massachusetts
tax increase. He said, “We don’t know the level of illegal tobacco
coming in from Virginia.”
State House News Service
Monday, December 9, 2013
Activist: Big Tobacco $$$ haul funding general government spending
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Chip Ford's CLT
Commentary
Among the taxes increased this year, allegedly to
fund transportation projects, was the excise tax on tobacco
products. Never mind trying to find a connection between smokers and
transportation that doesn't exist, the tax on a pack of cigarettes
was hiked by another buck a pack to $3.51, simply because smokers
are an easy target. And remember, then the 6.25% sales tax is
applied to the total; a tax on a tax. That brings
Massachusetts up to second-highest in the nation behind only New
York. I wonder how long this will stand before the Bay State
becomes Number One?
But that's just the tip of the $1B annual tobacco
tax revenue iceberg.
The anti-smoking crusaders are miffed because
more state (taxpayers) money isn't being spent on smoking prevention.
Put aside that they think the state has any
interest whatsoever in killing that cash cow. Less smoking
goes against government's billion-dollar vested interest. What they
ignore is that the Tobacco Settlement of 1998 was prosecuted and
settled as reimbursement for funds spent by the states in treating
smoking-related illnesses ― it was
intended as a reimbursement for that cost.
Let us remind them of why the lawsuit was
initiated and how it has ended.
As the settlement between "Big Tobacco" and the
46 aggrieved states came together back in 1998-99, CLT fought to insure that the proper
damaged parties received just restitution, reimbursement
― those who had paid the costs:
We the taxpayers. [See:
CLT's Tobacco Settlement Project]
In
my
testimony before the Joint Committee on Taxation (Jun. 23,
1999) on CLT's bill (S.1635,
"To Provide for the Return to the Taxpayers of the Proceeds from the
Nationwide Tobacco Settlement"), in part I noted:
In 1989, due to
fiscal mismanagement by the Dukakis administration, the state
income tax rate was "temporarily" increased from 5 percent to
5.75 percent. The estimated $793 million annual revenue increase
was to be used to close a $375 million FY '89 budget gap, to
compensate hospitals for $50 million lost through a shortfall in
federal Medicare funding ― and
to pay $484 million in past Medicaid bills....
The taxpayers have paid the cost of health care for uninsured
smokers with tobacco-related illnesses; we have paid the same
Medicaid bill over and over again a number of times. A decade
later and we are still burdened with the promised "temporary"
income tax increase, a huge revenue surplus due to continued
over-taxation, and now an additional $8.3 billion taxpayer
"reimbursement" that some want to spend.
It took 207 years for the state to reach its first $10 billion
budget, but only the last dozen to more than double it. When is
enough enough?
I hope this Legislature will not be a party to the ongoing
bait-and-switch scam, and will insure that taxpayers get their
long overdue promised relief, that they finally receive their
just reimbursement for their decades of compassion.
As then-Attorney General Harshbarger so aptly pointed out to the
court, using the very words of the Supreme Judicial Court
itself:
"Reimbursement is simply repaying or making good the
amount paid out."
The Legislature ― in
its 'infinite wisdom' ― as usual had "a better
idea." On April 12, 1999, the State House News Service reported (House
Leaders Want Tobacco Money Put in Permanent Trust Fund):
. . . Under the
proposal, all of the money ― an
expected $7.6 billion over 25 years ―
would go into a permanent trust fund, where it would collect
interest. During the first seven or eight years, lawmakers
would be allowed to spend around 15 percent of the principal
to "prime the pump" for expanded health care and tobacco
control programs.
After those first seven or eight years, the accrued interest
would catch up with annual spending, and further
appropriations would be from the interest only. [Rep.]
Stanley, who worked closely with [Reps.] Haley and Chandler
to develop the proposal, said that by reserving 85 percent
of the principal, the state could reap $40 million in
interest by 2000 and $100 million in interest by 2006.
In 2011, when the Baby Boomers begin to retire, the state
would be collecting $160 million per year in interest. At
the end of the 25 years of settlement installments, the
state could collect around $400 million per year in
interest, they said.
"The Commonwealth will have earned about as much in interest
as the principal," Stanley said. "That's an incredible gift
for future generations."
So what happened to those billions of
reimbursed dollars?
According to the state Office of the
Comptroller's "Comprehensive
Annual Financial Report For the Fiscal Year Ended June 30, 2012,"
page 109:
A Master
Settlement Agreement (MSA) was executed in November of 1998
between five tobacco companies and 46 states, including the
Commonwealth.
The MSA called for, among other things, annual payments to
the states in perpetuity. These payments have been
estimated to total more than $200 billion over the first 25
years, subject to various offsets, reductions and
adjustments. In FY12, the Commonwealth received
approximately $254 million or 68.5% of the estimated amounts
shown in the MSA. The FY12 General Appropriation
Act directed all MSA receipts to the General Fund.
Beginning in FY13, 10.0% of tobacco settlement payments will
be deposited in the State Retiree Benefits Trust Fund (SRBT)
to fund the Commonwealth’s liability for retiree health care.
The portion of the annual tobacco settlement payments
dedicated to the SRBT will increase to 10.0% per year until
it reaches 100.0% in FY23. The Commonwealth’s
allocable share of the total base amounts payable under the
MSA is approximately 4.05%. The Commonwealth’s allocable
share of the base amounts under the agreement through 2025
is nearly $8.96 billion, subject to adjustments,
reductions and offsets.
There was never any taxpayer reimbursement ―
and there is no "permanent trust fund" ―
unless you're a retired state government employee. The
Tobacco Settlement's billions is going to
the State Retiree Benefits Trust Fund and to fund state retirees'
health care.
When she exclaimed "That's an incredible gift for
future generations." I doubt then-Rep. Harriet Stanley had future
generations of government hacks in mind.
The anti-smoking lobby is miffed. It's not
getting enough state (taxpayers) money.
But we at CLT don't forget!
We taxpayers ―
the only damaged party in that multi-billion dollar tobacco
settlement ―
got none of the reimbursement.
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Chip Ford |
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State House News Service
Monday, December 9, 2013
Activist: Big Tobacco $$$ haul funding general government spending
By Andy Metzger
Tobacco taxes and the state’s annual share of a major tobacco
settlement add up to about $1 billion per year, and none of that
revenue is dedicated toward lowering smoking rates, an anti-smoking
panel told a task force Monday morning.
“None of that goes directly to tobacco control. Zero,” said American
Cancer Society Cancer Action Network lobbyist Marc Hymovitz.
The presentation coincided with a report from the Campaign for
Tobacco Free Kids that accused state officials throughout the
country of being “penny-wise and pound-foolish,” receiving $390.8
billion in tobacco revenue and $116.3 billion from the tobacco
settlement and spending only $8.9 billion on tobacco prevention
programs.
Hymovitz lamented reductions in the Massachusetts tobacco control
program, saying its only funding from the state comes from the
state’s General Fund.
“The program was funded at a high of about $50 million. This year
the program is funded at about $3.9 million,” said Hymovitz. “That
program among other things funds boots on the ground, out in the
local communities.”
Massachusetts spends 4.4 percent of the Centers for Disease Control
and Prevention-recommended $90 million on anti-tobacco programs,
ranking behind 34 other states and the District of Columbia.
“I think we have a more robust program than just the budget that
you’re seeing in that line item,” Commissioner of Public Health
Cheryl Bartlett told reporters. She said, “It’s a different approach
to public health that we’re taking today.”
Bartlett said efforts around tobacco are undertaken in other areas
of the budget, and the state has looked to reduce smoking by banning
it from public areas, removing the products from retail markets and
working with communities to pass local bylaws. The state is now
attempting to convince landlords to go smoke-free right now,
Bartlett said.
“We saw a significant improvement in a short period of time, and
like with many things, in order to get to those last few points, to
get to those last few individuals, you have to change your
strategy,” Health and Human Services Secretary John Polanowicz told
reporters, touting the 84 percent of youth who don’t smoke.
Hymovitz told the Illegal Tobacco Commission that the new $1 per
pack cigarette tax increase would lower the Bay State’s smoking
rate, as other tax hikes have in the past, and suggested the
commission should recommend sending some of the tobacco revenues
toward tamping out smuggling and reducing smoking.
The state’s funding for smoking cessation has dropped over the
years, so that Massachusetts can no longer afford to air
anti-smoking commercials, Hymovitz said.
“Those were really focused on people that had already begun smoking,
had been smoking for a period of time, and really needed to be
shocked into stopping,” Polanowicz said.
Most of the states reached a settlement with tobacco companies in
1998, which provided for payments in perpetuity.
The Illegal Tobacco Commission is nearly through with its
informational hearings. Tobacco industry officials told the
commission to expect more tobacco smuggling as the Legislature
raised tobacco prices to the second highest in the nation, just
below New York state.
Hymovitz said that as long as tax increases on tobacco are
significant enough, they result in less usage, in addition to tax
avoidance. He said the $1 increase, which brought the state tax on a
pack up to $3.51 would result in 27,000 less youth smokers.
Since August, the first full month the tax was in effect, the state
has recorded fewer packs sold, and despite the decrease in sales the
cigarette tax revenue is expected to climb by $118.5 million, with
additional revenue increases from cigars, chew and other tobacco
products, Hymovitz said. He said estimates show there will be about
27.2 million fewer packs sold in Massachusetts in fiscal year 2014
versus fiscal 2013. There were 214 million packs sold in fiscal
2013, and there are 6.6 million state residents.
In 1992, there were 547 million packs sold in Massachusetts and the
gradual decline has included steeper drop-offs when the tax was
increased, according to a Cancer Action Network presentation using
Department of Revenue data. In 1992, the state tax on cigarettes was
26 cents.
“Each time consumption did fall, yet at the same time the revenue
did increase,” said Hymovitz.
Hymovitz told the News Service that New Hampshire officials are not
usually willing to collaborate with Massachusetts on tobacco policy
because an increase in Bay State cigarette taxes is seen as a boon
for the Granite State, though he said that is usually overstated.
“Some come in from New Hampshire for personal use,” Hymovitz said,
saying the New England neighbor usually receives a “a little bit of
a bump” in revenue after a Massachusetts tax increase. He said, “We
don’t know the level of illegal tobacco coming in from Virginia.”
Revenue Commissioner Amy Pitter said the commission would hold one
more meeting on Jan. 9 before deliberating on what should be
included in its recommendations.
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NOTE: In accordance with Title 17 U.S.C. section 107, this
material is distributed without profit or payment to those who have expressed a prior
interest in receiving this information for non-profit research and educational purposes
only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
Citizens for Limited Taxation ▪
PO Box 1147 ▪ Marblehead, MA 01945
▪ 508-915-3665
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