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CLT&G Update
Thursday, December 3, 1998

"Beyond taxing smokers to cut smoking, politicians want to keep the taxes -- and not to rebate them. Public-health advocates covet extra money for pet programs; and lawyers crave their fees."

The Amazing Smoke Screen
Robert J. Samuelson

It didn't take long.

Our bill was filed yesterday to reimburse taxpayers by returning the $7.6 billion-plus tobacco settlement to them to compensate for their tax money allegedly spent over the decades to care for sick smokers, and the debate has begun.

We're talking about $7.6 billion over 25 years, then $325 million every year thereafter, forever.

But before we get into it any further, I've got one question that seems to have been run over and lost in the dust of this greed frenzy.

Last year alone, some $300 million in tobacco excise and sales taxes was paid by just smokers -- over, above, and in addition to what all taxpayers were gouged -- and poured into the state's coffers.

Does anyone really believe that last year it cost the commonwealth more than that $300 million paid by just smokers to provide uninsured smokers with taxpayer-funded health care for tobacco-related health problems?

Think about it.

Chip Ford --

PS.  Note the change [* in the AP report, below] of the senate sponsor of our bill: Sen. Bruce Tarr (R-Gloucester) agreed to file it only "by request of" CLT&G, but not sponsor it. "By request of a constituent" bills are virtually DOA in the Legislature.

Instead, at the last minute we asked Sen. Bob Hedlund (R-Weymouth) to sponsor this pro-taxpayer legislation too, he agreed, and will now carry the bill for us.

Associated Press

Wednesday, December 2, 1998

Tobacco money eyed for other purposes

By Jean McMillan

BOSTON (AP) -- With the ink barely dry on a national $206 billion tobacco deal, some activists are setting their sights on the millions of dollars expected to flow into the Bay State.

While Attorney General Scott Harshbarger and others are saying the money should be used solely for health care and antismoking purposes, at least one proposal suggests some of it be returned directly to taxpayers.

"This is not found money. This is money that has been expropriated from taxpayers all along," said Chip Ford, co-director of the Citizens for Limited Taxation & Government.

The group is behind a bill submitted by Sen. Bruce Tarr, [*] R-Gloucester, to return the tobacco settlement money to taxpayers through increases in the personal exemption.

Ford said those who fought for the money argued it was a reimbursement for money taxpayers spent on tobacco-related illnesses through Medicaid. So, he said, it's only right the money be returned to them.

Under the settlement agreed to by tobacco companies and 46 states, Massachusetts is set to receive $7.6 billion over 25 years. Harshbarger has said an initial payment of $98 million is expected in March, with larger annual payments beginning in the year 2000.

Harshbarger has said he plans to file a bill that would establish a commission that would make annual recommendations for the spending of the money. But he said he believed the funds should be used for health care and antitobacco efforts.

"Ultimately it's the Legislature's call, but in keeping with the spirit of how this money was obtained, we hope that they will earmark it for worthy public health goals," said Harshbarger spokesman Ed Cafasso.

Cafasso said he wasn't surprised that proposals to use the money for other purposes already were emerging.

"We never had any doubts there would be a feeding frenzy when you're talking about this much money becoming available," Cafasso said.

Acting Gov. Paul Cellucci said Wednesday he continues to favor reducing taxes by rolling back the state income tax to 5 percent, but he doesn't support using the tobacco money to accomplish that.

"I've heard from the attorney general and I think that he's right. This money should be used for health care and for antitobacco efforts, and that's what I intend to use it for," he said.

Ed Sweda, senior attorney with the Tobacco Control Resource Center at Northeastern University, said the settlement may be considered reimbursement for past costs, but that taxpayers still will have to pay the continuing costs of tobacco-related illnesses.

"It will be in the interest of taxpayers to spend whatever money does come in to try to take affirmative steps now to reduce the toll of tobacco that will otherwise be inflicted on the citizens of Massachusetts," he said.

November 30, 1998
The Amazing Smoke Screen

- and also -

The Boston Globe
Tuesday, December 1, 1998
A parody of good policy
Tobacco pact taxes poor, offers only modest health gains

By Robert J. Samuelson

We may have closure -- at least temporarily -- to the antismoking crusade of the 1990s. The agreement between state attorneys general and the tobacco companies for the industry to pay the states roughly $200 billion over 25 years may quiet the controversy. If so, this will be the agreement's main benefit, because otherwise it is a parody of good government policy. It imposes a steep tax on a heavily poor part of the population; it offers only modest health benefits; and it deepens popular confusion about the public consequences of smoking.

Let's concede the small possible health gains. The agreement will raise cigarette prices; tobacco analyst Martin Feldman of Salomon Smith Barney figures that retail prices will go from an average $2.07 a pack now to $2.90 in the year 2000. Higher prices might reduce the number of smokers by a few percentage points of the population.

Let's also note that the agreement aids the tobacco industry. By reducing the threat of lawsuits, it bolsters companies' stock prices. Still, the great myth of this struggle is that, just because cigarettes are unhealthy and the tobacco industry is often dishonest, the people on the other side must be morally superior. In truth, they - meaning plaintiffs' lawyers, politicians and public-health advocates - also frequently pursue their goals with a single-minded dishonesty and hypocrisy. And their motives are often selfish: personal enrichment (the lawyers); power and popularity (the politicians and public-health advocates).

Little wonder the results are disheartening. Almost everyone has long known that smoking is dangerous. In 1954, 70 percent of the public thought smoking "harmful" and 42 percent thought it "one of the causes of lung cancer"; by 1990, these responses were 96 percent and 94 percent. Most Americans also think that smokers decide for themselves whether to smoke. A 1997 poll asked who is "more responsible for... smoking-related illnesses," smokers or tobacco companies. By 76 percent to 17 percent, respondents said smokers.

The debate's central issue ought to be: How much is society entitled to penalize smokers for their decisions, because those decisions are deemed unhealthy? Should present smokers be punished (via higher taxes) to deter future smokers? These hard questions pit Americans' belief in personal freedom against the desire to protect public health. Precisely because the questions are hard, antismoking advocates diverted the debate to three other ideas, all dubious.

First, smokers aren't responsible for their behavior because smoking is addictive.

Second, smoking creates huge social costs -- mainly higher health spending -- that nonsmokers pay through higher taxes.

Finally, the tobacco industry should be punished and forced to compensate nonsmokers for smoking's social costs.

Even if smoking is addictive, people can -- often with much pain and hard work -- break addictions. There are now more ex-smokers than smokers. As for higher government costs, studies have shown that -- because smokers die earlier than nonsmokers -- they create savings for government through lower lifetime health and pension costs.

But suppose smokers lack free will and raise government's costs. Still, the industry could not pay those costs directly without going bankrupt. The money always has had to come from smokers through higher cigarette prices - the equivalent of a tax increase. Antismoking advocates rarely discuss this, because the implications are devastating. Smokers have low incomes. Only 20 percent of cigarette taxes are paid by those with incomes over $50,000; 34 percent are paid by those with incomes under $20,000 and 19 percent by those with incomes between $20,000 and $30,000. Moreover, smokers already pay steep federal and state cigarette taxes (now averaging about 58 cents a pack) that more than cover any possible public costs they create.

As a result, the antismoking crusade becomes a reverse Robin Hood arrangement: It sanctifies soak-the-poor taxes and robs the poor to pay the rich. The attorneys general's agreement now enshrines this. The rich, of course, are the private lawyers who represent the states in their tobacco suits. The agreement allows up to $500 million in annual fees for perhaps a few hundred and at most a few thousand lawyers. For how long? Arbitrators will decide. The cigarette dispute has evolved into a welfare program that may create some instant billionaires and many multimillionaires.

Because none of this can be defended, it is camouflaged. For self-interested reasons, the antismoking advocates never openly described public choices. Beyond taxing smokers to cut smoking, politicians want to keep the taxes -- and not to rebate them. Public-health advocates covet extra money for pet programs; and lawyers crave their fees. All this has involved an adept manipulation of courts and legislatures. A gullible public -- aided by a pliant press -- embraced the antismoking hysteria. Because the campaign succeeded, it will inspire assaults against other industries. We can't tell the target (whether alcohol, or autos or fatty foods) or the tactics. But it's just a matter of time.

Robert J. Samuelson is an economics reporter in Washington.

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