Federal Spending And The Budget

Tobacco Money "Recovered" For Taxpayers Will Be Spent On Politicians' Pets Projects

ALEXANDRIA, VA -- The $246 billion in "damages" extracted from tobacco companies by all 50 states shows the danger of allowing political smoke-blowers to pollute the legal system.

State attorneys general, 43 of which are elected, began their assault on Big Tobacco with the aim of recovering money the firms "rightfully owe to . . . taxpayers" for the costs of government health programs for smokers.

Legislators in states such as Florida and Maryland then passed dubious laws that encouraged the suits to move forward, hoping for the opportunity to hand out billions in tobacco cash.

As Maryland Governor Parris Glendening said, "Give me three more" billionaire tobacco lawyers like Peter Angelos, "and we don't have to worry about the budget."

Now that this legal gambit has paid off, every conceivable special interest group is lobbying for new spending. Legislators have rolled out the pork barrel for projects including a mental hospital in Arizona, a public employees' insurance account in West Virginia, school repairs in Ohio, and new sidewalks in Los Angeles.

Public health groups that instigated the tobacco litigation as a means to increase their own budgets are now crying foul, claiming that "the children" are being overlooked in the rush to spend the tobacco money.

They are learning the same sad lesson as taxpayers: you can't trust lawyers and politicians who promise you the check is in the mail.

Yet for all the politicians' antismoking rhetoric it is they who are addicted -- to the revenue that tobacco produces. Smoking actually provides a net benefit to government, which makes four times more profit than the tobacco companies from each pack of cigarettes.

The initial premise for the suits against Big Tobacco -- that smokers cost society -- was bogus. Their taxes more than cover the costs of treating smoking-related illnesses. But instead of using the money this way, government for years wasted it on a variety of social welfare programs.

Even the nonpartisan Congressional Research Service has concluded that "all in all, smoking has apparently brought financial gain to both the federal and state governments." And the respected New England Journal of Medicine determined that "smoking cessation would lead to increased health care costs."

The politicians continue to demonize tobacco and sing hymns about "investing" in costly government programs, leaving taxpayers to fight over the few pennies left in the poor box. As tobacco industry spokesman Steve Duchesne says, "When there's that much money available to politicians, they like to spend it on pet projects."

Unfortunately, this type of mass-tort litigation is really about raising money for big government rather than combating problems such as underage smoking.

For example, data collected using the NTU Foundation's BillTally system shows that supporters of the failed McCain tobacco-tax bill had legislative agendas in the 105th Congress to increase spending by $22.1 billion annually, while opponents cosponsored bills to cut the federal government by $4.1 billion.

The tobacco settlement was supposed to benefit the taxpayers. Instead it has caused cigarette prices to rise by 63 cents a pack, a back-door tax hike of $230 per year for the pack-a-day smoker. Individuals making less than $30,000 annually are absorbing the vast majority of this tax hit.

Worst of all for taxpayers, many of the host of programs funded with tobacco-settlement money will probably survive long after industry payments cease.

The states should refund their share of tobacco money to the taxpayers who were supposed to benefit from this litigation. By squandering the tobacco settlement, our elected officials are showing themselves to be a far greater threat to taxpayers than Joe Camel ever was.

Mark Schmidt is Director of Programs for the National Taxpayers Union, a non-partisan fiscal watchdog organization. Reader may write him at NTU, 108 N. Alfred, Alexandria, VA 22314



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