Taxes

Smoke that Tobacco Settlement Money When You Got It, Boys (Ohio Edition)

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You remember Ohio, don't you—that blue/red/purple state that had Barack Obama and Hillary Clinton talking down free trade and other hallmarks of what once was called the free enterprise system. Now state legislators are talking about raiding the booty they got from the big settlement against tobacco companies to create jobs, etc. This they do with the endorsement of "conservative" newspapers such as The Cincinnati Enquirer:

A proposal by Gov. Ted Strickland and legislative leaders [would] use $230 million in tobacco foundation funds to help rescue a $1.57 billion jobs program.

The transfer would leave just $40 million in the anti-smoking fund, created out of a settlement with tobacco companies 10 years ago. Foundation leaders say the fund will be exhausted in two years. No one's saying what will happen to the state's successful Quit Line program or other smoking prevention and cessation approaches. Meanwhile, state officials are saying economic recovery efforts can't wait…

A diversion of anti-smoking funds to economic development could result in increased state revenues, which in turn could be used to rebuild the tobacco foundation. Anti-smoking advocates would have to suspend their protests; state officials would have to do more than give their word. They've have to nail down such an earmark tightly….

Since its creation, the tobacco fund has been a ready source of revenue to address or avoid various financial crises. During the Taft administration, legislators used $568 million in tobacco payments to balance the budget. Last year, Strickland decided to take future tobacco payments in a $5 billion lump sum and applied the sum to property tax breaks for senior citizens and to school construction….

Ohio desperately needs a shot of economic adrenalin, and Strickland's plan looks broad enough and brave enough to provide that jolt.

The governor would create "a comprehensive stimulus package to fund development of biomedical, bioproducts and alternative energy industries. It would also fund local infrastructure improvements and expand internship opportunities for Ohio students." More here.

Those internships are vitally important, no doubt, to saving Ohio's struggling economy. As an Ohio resident, I hope this package will work better than, er, I guess that one put together by former Gov. Bob Taft (a third-generation pol who proves the idea of regression below the mean), which seems to have done absolutely nothing.

Since it's Tax Day, and I'm shoveling cash out the door to Columbus, I'll suggest another stimulus idea, one that doesn't rest about spending money gotten through found money in the form of the tobacco settlement or the ability of a state that's leaking population to lure cutting-edge industries back to Youngstown and Toledo: Cut your tax burden.

Ohio ranks fifth in the nation for state and local tax burdens. I'll be the first libertarian to tell you that taxes aren't the be-all and end-all when it comes to deciding where to live or put a business, but I'm absolutely certain that the plan being kicked around now won't do a goddamn thing to help the economy.

NEXT: Burn the Byrne

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  1. but I’m absolutely certain that the plan being kicked around now won’t do a goddamn thing to help the economy

    But it will buy votes.

  2. I hope this package will work better than, er, I guess that one put together by former Gov. Bob Taft (a third-generation pol who proves the idea of regression below the mean)

    Good morning to you too Nick, thanks for tanking my Taft joke before I could type it 🙂

    I’ll be the first libertarian to tell you that taxes aren’t the be-all and end-all when it comes to deciding where to live or put a business, but I’m absolutely certain that the plan being kicked around now won’t do a goddamn thing to help the economy.

    Huh? I was thinking you were a “big L” not a little l?

  3. I’m absolutely certain that the plan being kicked around now won’t do a goddamn thing to help the economy.

    Isn’t that amazing? I can’t believe how ingrained this Keynesian fantasy is. I guess we’ll never be able to kill the belief in free money.

  4. Don’t forget that Ohio also raised the minimum wage last year. And the minimum wage was tied into inflation to make sure that it keeps going up.

    Nephilium

  5. The transfer would leave just $40 million in the anti-smoking fund, created out of a settlement with tobacco companies 10 years ago. Foundation leaders say the fund will be exhausted in two years. No one’s saying what will happen to the state’s successful Quit Line program or other smoking prevention and cessation approaches.

    If anyone still believes that the tobacco settlement was about combatting the evils of tobacco use rather than just a shakedown for cash to buy votes with, they are a fool.

    For the same reason, the state legislatures do not want people to quit using tobacco.

  6. The transfer would leave just $40 million in the anti-smoking fund, created out of a settlement with tobacco companies 10 years ago. Foundation leaders say the fund will be exhausted in two years.

    Did I read this correctly? My vision went fuzzy when I got to “just $40 million.” These cretins are pissing away twenty million per year on this stuff?

    I’m going to start a PSA production company. But I’m not moving to the Busybody State.

  7. JsD,

    Agreed.

    I kinda like the Penn Gilette “solution”, actually, I think he got it from his producer.

    Goes something like this: If I was running a tobacco company and some State wants to sue me for legally selling in their State, fine. I stop selling them there and let everybody know they are available right across the border.

  8. Conservative, federalist types love to talk about how state and local governments are so much wiser and more efficient than the federal government…Federalism and libertarianism are really quite distinct.

  9. Goes something like this: If I was running a tobacco company and some State wants to sue me for legally selling in their State, fine. I stop selling them there and let everybody know they are available right across the border.

    Welcome to liquor laws in Texas. A lot of counties are dry, meaning no package sales, including Angelina County. One you cross the river north into the next county, the first 3 buildings on either side of the road are liquor stores. I’ve always been amused by the utter futility of it all.

  10. And you can bet the three liquor store owners in the next county are the biggest contributors to Angelina County’s dry pols.

  11. but I’m absolutely certain that the plan being kicked around now won’t do a goddamn thing to help the economy.

    But Nick! They’re going to “create jobs, right here in Ohio!” Not just jobs, but “good” jobs!

    Warren’s right. It’s positively amazing how much people have bought into this fantasy, even though it continues to not work! It needs to not work, but it needs to do that with a lot more fanfare than it’s getting.

  12. ohio has a bit of a brain drain problem. i’m not aware of any important industries there other than services and the cleveland clinic.
    some are content to live there but me and all my friends have long since moved away. taxes weren’t really a factor, though my experience would suggest a correlation between somewhere having high taxes and being a shitty place to live.
    every once in a while i’ll get a job offer from akron or dayton but have to respectfully decline

  13. Not just jobs, but “good” jobs!

    What could be better than being a “business development consultant” with a government contract?

  14. Cash! Tax Breaks!
    OM NOM NOM NOM NOM

    *URRRPPP*

    Got any more?

  15. “If I was running a tobacco company and some State wants to sue me for legally selling in their State, fine. I stop selling them there and let everybody know they are available right across the border.”

    That would be fucking legendary… and by “legendary”, I mean it would go down in history as one of the most idiotic business decisions in American history.

    Why? Because the moment you pull your products from the shelves, your competition will happily pick up whatever market share you used to have in that state. They might even send a thank-you note.

    For the sake of shareholders everywhere… please, never manage a business.

  16. But, Russ R, if you factor in tobacco taxes, then the plan could work very well. Here in my neck of the woods, people just go to the tribal smoke shops. For a long time, there was NO cigarette tax on the smoke shops; you can imagine how much that was pissing off the authorities!

  17. In New York State we have these horrifying things called Empire Zones, which are basically just a geographical location where, if you start a business there and grow the number of people you employ, you get tax breaks and other incentives. It used to be a way just to “create jobs” in particular areas that needed them the most, but when they realized that the whole freakin Upstate needed them the most, they created enough Empire Zones that they really didn’t do anything as far as managing the direction of new employers. They have recently found that a lot of companies that take advantage of the Empire Zone program haven’t been living up to the agreement, but are still receiving incentives as though they were. People are increasingly thinking these zones are a bad idea. Why? “We’re giving tax breaks to companies that aren’t growing jobs!” Not: HOLY SHIT! Our tax/regulatory burden is so high that we have to have special ZONES for 10-person companies to be able to survive?!

  18. Welcome to liquor laws in Texas. A lot of counties are dry, meaning no package sales, including Angelina County. One you cross the river north into the next county, the first 3 buildings on either side of the road are liquor stores. I’ve always been amused by the utter futility of it all.

    And you can bet the three liquor store owners in the next county are the biggest contributors to Angelina County’s dry pols.

    Well, duh.

    Completely off topic, why the fuck isn’t the HTML code for blockquotes a simple BQ?

  19. why the fuck isn’t the HTML code for blockquotes a simple BQ?

    Hippies.

  20. Russ R,

    Maybe you should think these through a little farther in the real world that created the problem, thather than the Rainbow and Puppy World of us already operating a free market?

    a comment after yours might give you some additional information to consider.

  21. I think my first impression of Ohio has never really changed…

    “They don’t have drive-thru liquor stores? WTF?”

  22. why the fuck isn’t the HTML code for blockquotes a simple BQ?

    Computer Science humor. Also see: “referrer” tag.

  23. Completely off topic, why the fuck isn’t the HTML code for blockquotes a simple BQ?

    Because the propellerheads who designed HTML hate you.

  24. “But, Russ R, if you factor in tobacco taxes, then the plan could work very well.

    Congratulations! You’ve just joined Guy on the list of geniuses who should never manage a business.

    I’m going to spell this one out for both of you… read slowly if you need to.

    Assume there are 1 million smokers in the state, and you have 20% market share… that’s 200,000 smokers who one day show up to the store and are told that the brand they used to smoke is no longer available for sale in their state, but they can go to another state if they really want to buy it.

    What percentage of those 200,000 do you think will just decide to pick up one of the other available brands sold by your competition? And what percentage do you think are so loyal to your brand that they’ll drive to another state to buy their smokes?

    For the sake of example, let’s put the split at 80/20, and that’s being generous.

    Which means, you lose 80% of your sales for that state, but the government loses only 4% of its tax revenue.

    Way to show them….

  25. why the fuck isn’t the HTML code for blockquotes a simple BQ?

    Hippies.

    Hippies: destroying America in ways you never even imagined.

  26. In answer to your question:

    1) It depends on the tax circumstances: if one state has a 9% tax and the next state has a 2% tax and there is no penalty for buying in bulk, then it is very possible that my sales will increase. Again, this happens very commonly in my area.

    2) It depends on geography: What part of the country are we in? In my part of the country, we border five states and I can get across a border in just over an hour. Also in my part of the country, people don’t mind driving that far. And don’t get me started on New England, where you can drive across 10 states in an hour.

    So, I don’t think your “80/20 split” is at all generous. Here in reality land, people have been going across the border by the thousands and have been tanking ciggy tax revenues.

    3) It depends on the political climate: if enough political programs depend on cigarette sales taxes, such a move of protest could force a change in the political system.

    Yes, I understand the concept of price elasticity, oh wise one. And I understand that it is probably rational to NOT do this. But don’t be a condescending prick to people when you haven’t thought through everything.

  27. Yes, I understand the concept of price elasticity, oh wise one. And I understand that it is probably rational to NOT do this. But don’t be a condescending prick to people when you haven’t thought through everything.

    Isn’t that a key element in condescention?

  28. Which element: me mocking him, or just not thinking through things?

  29. Not thinking through things, of course.

  30. “1) It depends on the tax circumstances: if one state has a 9% tax and the next state has a 2% tax and there is no penalty for buying in bulk, then it is very possible that my sales will increase. Again, this happens very commonly in my area.”

    Your sales could INCREASE?

    So you’re saying that by ending sales in one state even MORE people than you previously had as customers would travel to another state to buy your cigarettes? WTF? And you say this happens very commonly? What exactly are you smoking?

    2) It depends on geography: What part of the country are we in? In my part of the country, we border five states and I can get across a border in just over an hour. Also in my part of the country, people don’t mind driving that far. And don’t get me started on New England, where you can drive across 10 states in an hour.”

    Any time you impose an additional cost on anyone, you are going to make the alternatives relatively more attractive. Yes, if you’re talking about people who live near a border it will have less impact, but it’s ALWAYS going to be a whole lot easier for people to pick a different brand than to drive to a different state.

    So, I don’t think your “80/20 split” is at all generous. Here in reality land, people have been going across the border by the thousands and have been tanking ciggy tax revenues.

    Yes, some people have ALREADY been willing to travel across borders. You’re betting that the people who WEREN’T ALREADY willing to do so in the past will become willing to do so in the future. Plus, the people you’re talking about are motiviated by monetary savings… you’re hoping people will be similarly motivated by brand loyalty. I’d bet that the majority of them won’t.

    “3) It depends on the political climate: if enough political programs depend on cigarette sales taxes, such a move of protest could force a change in the political system.”

    And do you really think that such a change could possibly work in the tobacco industry’s favor?

    Yes, I understand the concept of price elasticity, oh wise one. And I understand that it is probably rational to NOT do this. But don’t be a condescending prick to people when you haven’t thought through everything.

    But being a condescending prick is so easy and so much fun when people spout idiotic ideas try to make a point.

    Do you honestly believe that in a competitive retail environment, you could possibly inflict more damange to the state government’s largely unaccountable bureaucrats than to your own shareholders, by pulling your profitable product from store shelves? And you’re accusing me of not having thought things through?

  31. The original proposition was:

    If I was running a tobacco company and some State wants to sue me for legally selling in their State, fine. I stop selling them there

    One could, of course, just pay the fucking ransom. And pass the costs along, because corporations don’t pay taxes, customers do. That is the “sensible” response.

    But what if vacating the local market while making it possible for the customer to continue to purchase the product, might actually result in a price advantage?

    Millions for defense; not one cent for tribute!

  32. Last year, Strickland decided to take future tobacco payments in a $5 billion lump sum

    I wonder if he signed up for one of those programs offered by the “IT’S MY MONEY, AND I WANT IT NOW!!!” commercials?

  33. The solution (s) for Ohio’s depleted tobacco fund is (are) quite simple.
    1. Raise cigarette taxes-more revenue
    2. Sue those bastard health destroying tobacco companies again and again,.

    Mom, he’s still hittin’ me.

  34. 1. Raise cigarette taxes-more revenue

    Yup. New York just did that.

  35. If you raise gasoline taxes at the same time, people won’t be able to afford to drive to a cheaper locale.

  36. f you raise gasoline taxes at the same time, people won’t be able to afford to drive to a cheaper locale.

    And, per the other thread, “if you chose to walk, I’ll tax your feet.”

  37. Speaking of gas taxes, Sen. McCain is going on record to suspend the federal ones every summer. Did he get a good waterboarding from Americans to exercise all that Hanoi claptrap he was fed in Vietnam or somethng?

  38. Sen. McCain is going on record to suspend the federal ones every summer

    GM – are you serious? That sounds like the kind of dumbassery a pol like McCain would propose.

  39. Completely off topic, why the fuck isn’t the HTML code for blockquotes a simple BQ?

    Because there are two kinds of computer geeks: those who know how to touch type, and those who don’t. You can look at any programming language or keyword in a meta-language like HTML and tell which of the two camps came up with it.

  40. Actually, there are 10 types of computer geeks those who use binary, and those who don’t.

  41. Completely off topic, why the fuck isn’t the HTML code for blockquotes a simple BQ?

    Because the propellerheads who designed HTML hate you.

    Finaaly, a response that I can believe.

  42. SugarFree | April 15, 2008, 10:18am | #
    I think my first impression of Ohio has never really changed…

    “They don’t have drive-thru liquor stores? WTF?”

    That’s because here in Ohio when we go shopping for liquor we require shopping carts.

  43. A diversion of anti-smoking funds to economic development could result in increased state revenues, which in turn could be used to rebuild the tobacco foundation.

    I don’t see what the big deal is. Think of it this way: The government is eminent domaining some funds in one bucket, for use in another all in the name of “public purpose”.

  44. Oh hey, I just learned a new corporate phrase that really means nothing to anyone with a brain, but means a lot to corporate type people: “Cost synergies”

    The governor could use this new phrase, “cost synergies” to label his new fund diversion program.

  45. What part of the state are you in that there are no drive-thru liquor stores??

    But more on topic, I just read this shit and cringe. I went through school and did all this stupid career profiling at least once a year and they do this everywhere in the state. There were little things like activities deciding what you wanted to do or finding skills you possessed, and it was worked up to be this big thing that Ohio employers would be interested in. Then they handed it to us after high school and its worthless. I did it at least once a year from 4th grad until I graduated high school. What a waste…

    There are no jobs in Ohio that pay decent that aren’t union (with the exception of the Honda plant in Marysville, but trust me, its hard to get in). As a recent college grad, I wanted to go back to Ohio from Indiana, but there is nothing there for me. It’s pretty sad.

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