As we have seen, tobacco holds a very strange position in society. The producers are rewarded for producing it, while the consumers are punished for consuming it. The government both encourages and chastises its existence, sale, and use.
The same goes for alcohol. Entire government departments are devoted to preventing the use of these substances; discouraging the young from ever starting to use them; controlling their availability especially in relation to the young; dealing with the catastrophic and expensive results of their overuse; and punishing the manufacturers for inappropriate self-promotion.
Meanwhile, the government does everything it can to make the lives of these and other corporations a dream landscape of permissiveness. In return, Uncle Sam takes his cut. Liquor and tobacco are lavishly taxed. Why? Because they are bad for people. Religion and government are supposed to be separated, so we cannot forthrightly call these sin taxes, but that is basically the gist of the situation.
The taxation of tobacco products is credited with decreasing tobacco use by making it less affordable. But the corporations are not hurt, according to this analysis:
Conceptually, such a tax is shifted to consumers of the product, and […] there may be an overshifting of the tax. Imposition of an excise tax-like payment may facilitate collusion in price among competing companies. Thus, profitability may increase after the tax is imposed.
In the 1998 Master Settlement Agreement (MSA), the industry agreed to pay the states in perpetuity for the present and past damages caused by their products. However, “neither the federal government nor persons with tobacco related diseases were compensated by the MSA… Recipients of MSA funds were not required to spend the money in particular ways.”
Although not exactly a tax, it had the same effect of encouraging the manufacturers to extract more from the customers, and in the month following the passage of the MSA, retail tobacco prices rose by close to 20 percent. The Public Health Law Center elaborates:
Many states use a small portion of the funds for tobacco control and cessation programs, but most of the money is typically used for other purposes, such as security for loans or simply for a state’s general fund. No states provide for direct MSA payments to individuals to pay for medical costs resulting from tobacco use.
Concerning prevention and cessation programs, the Tobacco Free Kids organization puts a finer point on it:
While overall funding did increase for such programs, especially in the first few years after the MSA, many states subsequently cut funding and almost every state broke its promise… Most states have consistently fallen far short of funding these programs at amounts recommended by the U.S. Centers for Disease Control and Prevention.
Over all the years, for instance, Connecticut, Missouri, and West Virginia have spent $0 on tobacco prevention programs, while others have spent for that purpose only a tiny fraction of what they receive. The MSA money is basically a bribe the industry pays as the cost of doing business, while the revenues are dispersed at the whim of each state’s political bosses in ways that don’t prevent smoking, help smokers quit, or cure tobacco-related illness.
Your responses and feedback are welcome!
Source: “Impacts of the Master Settlement Agreement on the tobacco industry,” BMJ.com, 2004
Source: “The Misleading Ad about Individual Payments from the Master Settlement Agreement,” PublicHealthLawCenter.org, June 2017
Source: “Finish the Fight Against Tobacco,” TobaccoFreeKids.org, 11/26/18
Photo credit: Paul Sableman on Visualhunt/CC BY
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