Big Tobacco, a.k.a. Your State Government

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State governments may have picked the wrong time to get into the tobacco business. With cigarette sales at the lowest level since 1951 (when the U.S. population was half what it is now), they are making less money than they expected under the 1998 agreement that settled their lawsuits against the major tobacco companies. In addition to reductions in smoking (spurred in part by the agreement itself, which caused a sharp increase in prices), the states have to contend with Philip Morris et al.'s complaint that they have not done enough to protect the leading cigarette manufacturers from small competitors that are not parties to the settlement. Citing a provision in the deal that allows them to reduce their payments if their combined market share falls below a specified threshold, the big tobacco companies plan to withhold $1.2 billion this year. In their defense, the states say they are doing all they can to screw over smokers and smaller tobacco companies through requirements that jack up prices and discourage competition.

As I noted in a column last fall, the Competitive Enterprise Institute is challenging this government-enforced cartel in federal court.

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  1. “they are making less money than they expected under the 1998 agreement that settled their lawsuits against the major tobacco companies.”

    but their spending levels are way up. gotta love it how the states screwed over these (albeit kinda sleeeeeezy, IMO) companies as a de facto tax increase. i’m not weeping for the tobacco companies, rather, i recoil in disgust with the governments’ actions.

    what a terrible episode. but notice that many of the scandals in the 90s involved tobacco. cigarettes or cigars (hand dipped ones, of course).

    kinda like the tobacco companies’ defense here. snicker. but we’re getting all in a froth about state controlled companies running ports, when we’re doing that with tobacco. make up your minds, people. is it state owned? or is it because of where the state owned ones are from? and why isn’t anybody bothered that some chinese state-owned companies own and run stuff here, too?

    and taxes of cigs in chicago are through the roof. HA! the demographics show that lower income people smoke more. it’s a government conspiracy against poor people!

    now, where’s the bottle. time for a drink.

  2. There is something stupid about increasing your reliance on taxes from a product that your trying to put out of business.

    What would the States do if the tobacco companies stopped selling in the U.S.?

    Pass that bottle.

  3. What would the States do if the tobacco companies stopped selling in the U.S.?

    Simply increase the tax rate on something else like income, gas, sales, movies, etc.

  4. “What would the States do if the tobacco companies stopped selling in the U.S.?”

    I keep waiting for the fat tax.

  5. You reap what you sow. Or in this case, prevent from being sowed.

  6. Smoking is down. Good. What the hell is the problem with that? Screw the tobacco companies. Who cares about them?

    JMJ

  7. Jersey,

    Apparently the states do. As they have shown in their reliance on tobacco tax. Who knows, they may end up *requiring* us to smoke so they can continue to spend spend spend.

  8. The states want to discourage smoking, but set up programs dependant on cigarette tax revenue. Gee, who could have seen a conflict there? Apart from people with functioning brains, that is.

  9. Look, folks, if smoking goes down then the need for the sintax revenues goes down, right?

    What exactly is so heard for you guys to figure out here?

    JMJ

  10. Look, folks, if smoking goes down then the need for the sintax revenues goes down, right?

    Since the tax revenue goes mostly toward programs that are completely unrelated to smoking, no.

  11. Rich-Forget it. JMJ is a troll.

  12. Look, folks, if smoking goes down then the need for the sintax revenues goes down, right? What exactly is so heard for you guys to figure out here?

    No doubt on the planet of your birth, taxes are taken from specific entities or organizations for purposes directly related to issues arising from those entities or organizations.

    However, here on planet Earth all road taxes, sin taxes, birth, life, death, income, outgo, and every other kind of tax goes into a big pot to which the politicians who wrote the tax laws have access for purposes of buying votes and attracting lobbyists. Believe me, the need for that will never go away.

  13. There is something stupid about increasing your reliance on taxes from a product that your trying to put out of business.
    Nazi Germany had the same dilemma – “The Nazi War on Cancer” (Robert N. Proctor) was quite interesting re similar methods. And, IIRC, the SS had their own brand.

    Cato article:
    http://www.cato.org/pubs/pas/pa-371es.html :
    The 1998 tobacco settlement is a sophisticated, white-collar crime instigated by contingency fee lawyers in pursuit of unimaginable riches. In collaboration with state attorneys general and the four leading tobacco companies, they concocted a scheme that forces all tobacco companies-even new companies and companies that didn’t join the settlement-to engage in a program of price fixing and monopolization. Essentially, the major cigarette makers bought permission to fix prices and exclude competitors.

  14. Nearly on topic, but will Jacob be reviewing the movie, “Thank You For Smoking”?

    https://reason.com/9411/bk.sullum.shtml

  15. Smoking is down. Good. What the hell is the problem with that? Screw the tobacco companies. Who cares about them?

    The parasite cares about the host. So, in this case, the state cares about the tobacco companies. The state has entered into a parasitic agreement with Big Tobacco(tm) and based on the terms of the deal, in combination that once again, a source of tax revenue is based on hard to pin down economic factors (taxes go up, but revenue goes down).

    Big Tobacco(tm) will lose market share, but there are plenty of small companies who never signed on to the deal- the state loses, I say hooray!

  16. Paul, the moneys from sintaxes are ostensibly raised for to offset the cost of the sins. If the sins decrease, then the need for the revenue decreases. As for your pleasure at the success of these scumbag drug dealers, which is what tobacco companies are, you should be ashamed of yourself.

    JMJ

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