A Ballot Committee of Citizens for Limited Taxation


Boston Sunday Herald
February 21, 1999

Smoke and mirrors
deprive taxpayers of tobacco money

by Chip Ford

We act on the idea that smokers imposed a financial burden on nonsmoking taxpayers. This was and is a false premise.

Your uninsured friend has been injured by a negligently produced product and you have paid her expensive medical bills. Then you hired a lawyer and paid him out of your pocket too. He's gone to court, sued to recover for your damages, and won the case; you've been awarded a just settlement for your costs. But he gives your entire reimbursement to consumer advocates, because he believes they might help others avoid what happened to your friend.

Would you be grateful for your lawyer's compassion and generosity, or would you demand your rightful restitution from him?

Former Attorney General Scott Harshbarger is that lawyer, and you and other Massachusetts taxpayers are the caring friend to whom the "tobacco settlement" belongs. But state government is ignoring your claim to the award, instead debating how to spend your share of the multi-billion dollar reimbursement.

In a transparent bait-and-switch scam, this reimbursement for the state's past health care program costs for smoking-related illnesses is being earmarked to expand government programs and create new ones. This switch comes despite winning arguments that litigation against the tobacco industry was to "recover" the cost borne by taxpayers.

The opening complaint in Commonwealth v. Phillip Morris, Inc. states that the attorney general "brings this action on behalf of the Commonwealth of Massachusetts ... to recover the smoking-related costs to the Commonwealth, including, but not limited to, increased expenditures for ... Medical assistance provided under Massachusetts' Medicaid program [and] the CommonHealth Program.... In fulfilling its statutory duties, the Commonwealth has expended and will expend substantial sums of money due to the increased costs of providing health care services for smoking-related diseases."

It's clear from this language that we taxpayers are entitled to at least what we have already expended. Tobacco industry money that will be spent in the future is a windfall for the state. As such, it simply transfers more of our tax dollars into even larger state surpluses and savings accounts. An argument could be made that these surpluses also should be returned to the taxpayers.

In taking the position that the tobacco reimbursement belongs to the taxpayers, we utilize the popular assumption that smokers imposed a financial burden on non-smoking taxpayers. In fact, this was and is a false premise.

Annual state tobacco excise and sales tax revenue alone totals $300 million. The commonwealth reportedly spends $200 million a year on smoking-related illnesses. That's a $100 million annual net profit for the state from smokers alone.  Despite this exculpatory fact, the tobacco settlement was agreed to by all parties and "recovery" is on its way.

The $250 - $350 million each year the state is scheduled to recover from the settlement for at least the next 25 years, added to the $100 million annually paid by smokers above the cost of state-provided health care to them, brings the state's yearly tobacco revenue bonanza to some $400 million.

In a letter to the New York Times, even liberal Democratic Congressman (now U.S. Senator) Charles Schumer of New York recognized the intent of the tobacco settlement recovery award. He wrote: "It makes sense for the state to use $9 billion of its $25 billion share of the settlement to reduce county property taxes -- not because it may be politically popular, but because this is the amount that rightly belongs to property taxpayers in the counties outside of New York City who bore much of the cost of treating tobacco illnesses. ... New York is one of only two states that ask county taxpayers to pay half of the state's portion of Medicaid. ... It is only fair to return to county taxpayers the billions that they paid."

The $7.6 billion Massachusetts "tobacco settlement" is the result of Harshbarger's relentless assertion that state taxpayers were damaged by the tobacco industry. He argued that the Commonwealth, by extension the taxpayers, was unjustly burdened by state-funded health care costs for smoking-related illnesses. He argued in Middlesex Superior Court: "As the Supreme Judicial Court has held, reimbursement is simply 'repaying or making good the amount paid out.'"

If we accept that basic premise, as state politicians apparently have, then it's time for long-suffering taxpayers to receive their just reimbursement.

Chip Ford is director of operations for Citizens for Limited Taxation.

More information on the "Smoke and Mirrors" Bait-and-Switch scam.

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