Government Complicity in Tobacco Related Health Problems

Right From the Start

Cigarettes are back in the news.  A variety of cities and states are contemplating banning e-cigarettes indoors.  The Food and Drug Administration (FDA) is reported to have found trace carcinogens in e-cigarettes and is contemplating action.  (California has considered banning them but then what would all the Hollywood phonies do during their awards shows.)  Additional cities and states have banned or are considering banning cigarettes outdoors and as well as indoors.

A recent article I read while at my dermatologist’s office asked the question, “Why not simply ban cigarettes?”  That’s not the first time someone has asked that question.  Nor is it the first time that they have intimated that the culprit is the powerful “tobacco lobby.”  (I don’t want to minimize the influence of the well-funded tobacco lobby or how adaptive it has become in a changing political and economic environment.  The tobacco industry was one of the early leaders in demonstrating that wealth permits mobility as it has shifted it focus to international markets as government regulation has burdened its growth domestically.  It has also demonstrated its flexibility as it has migrated its “domestic” products from tobacco to a variety of others areas including food products (RJ Reynolds and Nabisco – since dissolved) and alcohol and food products (Phillip Morris – now Altria Group – and Kraft Food and SABMiller Group) -since reorganized.)  But, despite wishful thinking, there is another culprit of equal or greater culpability.

The health risks of smoking or chewing tobacco have been pretty well documented and are generally accepted.  The health care costs attended to diagnosing and treating the aftermath of smoking are also well documented and accepted.  Taxpayers wind up bearing a substantial portion of these costs because a disproportionate number of low-income people use tobacco products.  According to the Center for Disease control (CDC) approximately 19.0 percent of adults use tobacco products.  However, 29.0 percent of adults living below the poverty level use them.  There is a racial component to smoking and healthcare costs.  Again, according to the CDC, while the percentage of Blacks (19.4%) using tobacco products is approximately the same as the national average of adults using, and slightly lower than Whites (20.6 percent), the incident of lung cancer is substantially higher.  A 2010 report by the CDC noted:

“During this study period, annual incidence per 100,000 population was highest among blacks (76.1), followed by whites (69.7), American Indians/Alaska Natives (AI/ANs) (48.4), and Asian/Pacific Islanders (A/PIs) (38.4). Hispanics had lower lung cancer incidence (37.3) than non-Hispanics (71.9). Incidence varied greatly with age, peaking among persons aged 70–79 years (426.7). The region with the highest incidence was the South (76.0); the lowest was the West (58.8). Among whites, the highest lung cancer incidence was in the South (76.3); the highest incidence among blacks (88.9), AI/ANs (64.2), and Hispanics (40.6) were in the Midwest, and the highest incidence among A/PIs was in the West (42.5). These findings identify the racial/ethnic populations and geographic regions that would most benefit from enhanced efforts in primary prevention, specifically by reducing tobacco use and exposure to environmental carcinogens.”

And while those who, like President Barack Obama, tend to see America through a “racist lens” the higher incident of smoking related diseases probably has more to do with socio-economic conditions than skin color, it is further reinforcement that those with less suffer a disproportionate burden of both smoking and its effects.  Well then, who is the culprit?

During President Richard Nixon’s defining Watergate scandal, reporters Bob Woodward and Carl Bernstein were admonished to “follow the money” by insider “DeepThroat.”  So, let’s follow the money.  A 2013 report by the Tax Policy Institute, indicated that tobacco tax revenues grew from $3.6 Billion in 1977 to $17.7 Billion in 2011 (Oregon’s revenues grew from $31.8 Million to $262 Million.  A report by RJ Reynolds noted:

“Here are some of the facts about tobacco taxes today:

• Since 1998, governments at all levels have collected more than $484.6 BILLION in cigarette taxes (including sales tax) and payments from smokers.
• Settlement payments, federal, and state and local taxes on cigarettes for fiscal year 2012 amounted to more than $43.3 BILLION.

– Federal excise taxes – $14,870,000,000
– State and local excise taxes – $17,446,492,000
– State cigarette sales taxes – $4,207,463,000
– Tobacco settlement payments – $7,190,051,472

• The government per-pack profit from cigarettes in 2012 was $3.78 (or 66 percent of the cost of a pack of cigarettes); almost ten times the profit of R.J. Reynolds Tobacco Company.”

A 2013 study by the Campaign for Tobacco-Free Kids indicates that the vast majority of states, including Washington, Oregon and California have spent less than twenty-five percent (Oregon – 17.5%) of their tobacco settlement funds on efforts to reduce tobacco use.  The study concludes:

“In Fiscal Year 2014, the states will collect $25 billion in revenue from the tobacco settlement and tobacco taxes, but will spend only 1.9 percent of it – $481.2 million – on programs to prevent kids from smoking and help smokers quit. This means the states are spending less than two cents of every dollar in tobacco revenue to fight tobacco use.”

So where do all of those dollars go?  Well, in truth, they are used primarily in each state’s General Fund to pay for government services – well not really, because most government expenditures are for public employees (approximately eight-five percent) and their inflated healthcare and retirement benefits.

The fact of the matter is that the addictive qualities of tobacco have been transformed into revenue addiction by local, state and federal governments.  If the federal government or Oregon state government were to actually shut down the sale of tobacco products (either by dramatically increasing tobacco taxes – say one hundred dollars per pack or using its police powers relating to health and safety) state government would forfeit over a quarter billion in tax revenues annually.  Oregon’s public employee unions and big government liberals are not going to let that happen.

While those forces may wring their hands and cry publicly for the chi-il-l-l-ld-ren, (please moan while repeating) they are not going to forego such a dramatic source of revenue.  (This is where hypocrisy stands on its highest mount.)  Instead, state government engages in what are called ” price/volume regression analysis.”  (For those of you forced to endure a teachers union led education in the Portland public schools, that is a means of determining the effects of price changes on the volume of sales.)

The point is that at any given time there is a point at which increasing a price will reduce the volume of sales to a point where less total revenues is derived.  That point changes from time to time and is often related to the delta (difference) between the current price and the desired price increase.  And so it is with tobacco.  Federal, state and local governments are more than willing to increase the taxes on tobacco, but they are unwilling to increase them to the point of diminishing return let alone elimination of returns.  That tax burden is among the most regressive that exists.  A disproportionate number of low income people smoke and they must pay the tax for such a vice.  The very states which call out to protect the least able, profits greatly from their addiction. For the same reason, governments are willing to impose draconian regulation on the use of tobacco but never such that it results in the end of the use of tobacco.

Like many other vices such as gambling and alcohol – even prostitution in Nevada – government has become a partner in promoting that which by those same governments have deemed to be dangerous and in need of strict controls.  And for those of you who favor legalization of marijuana, get used to the financial involvement of the government who will find yet another vice from which to profit.