The American Cigarette War
The American Cigarette War
by Dave A Vance
June 5, 2009
With the United States (U.S.) government dependant on tax revenue from the tobacco industry, lawmakers, health experts, and non-smokers are losing the war against cigarettes. More state and local governments continue to ban and restrict smoking in public places, but with the federal government and states reaping in tax revenue at 82% of the price of a pack of cigarettes, no-smoking advocates are at a disadvantage.
In an effort to financially harm and force regulation on the tobacco industry, individuals and states have filed numerous lawsuits against cigarette manufacturers. Outcomes of the lawsuits vary, but the results have forced the tobacco industry to pay billions of dollars and adhere to new restrictions. In the majority of lawsuits and settlements, the tobacco industry has not admitted fault. If fault were admitted, the door would be wide open for future lawsuits by any smoker and rewards for plaintiffs would be astronomical.
In November of 1998, five major U.S. tobacco manufacturers settled pending lawsuits with 46 states, the District of Columbia, and five U.S. territories for $246 billion in what has been named the Master Settlement Agreement (MSA) (Niemeyer, et al., 2004). Annual payments from the settlement are to be made to the states and territories for 25 years and are intended to recompense states for Medicaid costs of treating smoking-related illness. In addition to the financial settlement, the involved tobacco companies agreed to new advertising and marketing restrictions. As part of the settlement, the tobacco manufacturers denied all allegations and the involved states and territories agreed to not file future lawsuits with similar accusations against the tobacco companies (Niemeyer, et al., 2004).
Not all major lawsuits filed by the government have resulted in losses for the tobacco industry. In February of 2005, a federal appeals court ruled in favor of the tobacco industry in a 1999 case where the U.S. Justice Department sued the tobacco industry for racketeering. The U.S. Justice Department was seeking $280 billion from tobacco companies (The Associated Press, 2005). This lawsuit is still pending an appeal from the U.S. Justice Department.
Lawsuits have been filed by individuals against tobacco manufacturers for deceptive marketing, hiding industry-known health issues, and health problems caused by smoking. Claims made in lawsuits filed by individuals cover a broad spectrum of issues and have varying results. According to an article on Slate.com, “Smokers have been suing tobacco companies since the 1950s. Until recently, they have been almost entirely unsuccessful–mainly because tobacco companies argued effectively that smoking is a personal choice and that people have known of its harmful side effects for years” (Barbera, 2000, para. 2).
Lawsuits filed by individuals have grown stronger in recent years because plaintiffs have been providing proof that tobacco manufacturers have known that cigarettes are addictive. Proof was obtained by receiving internal tobacco company documents from sources within tobacco companies. According to Barbera, in February 2000, Phillip Morris was ordered to pay $51.5 million to a woman who developed lung cancer. A month later, Marlboro was ordered to pay $81 million to a man’s family after he died from smoking for 40 years. Judges later reduced the awards by half, but the tobacco companies appealed the cases (Barbera, 2000).
An $800 billion class action lawsuit against Phillip Morris was thrown out by a federal appeals court in April of 2008 (Saul, 2008). According to Saul, the lawsuit was filed “on behalf of smokers who said they had been misled that light cigarettes were safer than regular ones.” In a similar case, in December 2008, the U.S. Supreme Court ruled that tobacco firms can be sued for deceptive advertising (Vicini, 2008). Three men in Maine were suing Phillip Morris and as a result were permitted to proceed with a class action lawsuit. According to Vicini’s Reuters article, “The class-action lawsuit claimed Philip Morris engaged in unfair and deceptive acts or practices in its representations that certain brands of its cigarettes are ‘light’ or have ‘lowered tar and nicotine’” (para. 4).
Lawsuits are not the only methods that have been used to harm the tobacco industry. Smoking bans have gained momentum over the past few years. Some cities have banned smoking in restaurants, some include bars, and others include bans on any indoor or outdoor public property. Laws are also being passed to prohibit smoking in vehicles when children are passengers. While smoking bans have been implemented in many U.S. cities and many other countries have banned smoking in public places, a nationwide ban on smoking in the U.S. does not seem probable in the near future.
“Across the United States, 16,519 municipalities are covered by a 100% smokefree provision in workplaces, and/or restaurants, and/or bars, by either a state, commonwealth, or local law, representing 70.2% of the US population” (American Nonsmokers’ Rights Foundation, 2009, para. 12). Arguments exist on both sides of the issue. On one side, non-smokers feel their rights are being infringed on by being forced to breathe smoke-filled air. On the other side, smokers feel they have the right to smoke. In the middle are businesses who believe they should have the option to make the decision to allow smoking or not because they operate private businesses. There is currently debate in Texas, where businesses in cities that ban smoking in public establishments are complaining that they are losing patrons to nearby cities who do not have smoking bans. Texas legislators are contemplating enacting a statewide ban on smoking in restaurants and bars. The Texas Restaurant Association is supporting this action in an effort to make the playing field fair for all restaurants in all cities (Ramshaw, 2009). Texas Governor Rick Perry is reported to have said, “that while he fully understands the health concerns of cigarette smoke, he likes the idea of local control and wants to find a way to walk the line that protects individual rights” (Ramshaw, 2009, para. 17). According to The Dallas Morning News, Smoke-Free Texas conducted a survey that concluded “68 percent of Texans support banning smoking in all indoor and public places” (para. 18).
Despite calls by anti-smoking groups and legislators for the government to regulate tobacco products, the Supreme Court ruled in 2000 that the Food and Drug Administration (FDA) did not have the authority to regulate tobacco products (Cole, 2009). The federal government is once again considering giving the FDA some authority over the tobacco industry. According to Cole, in April 2009, the House voted to give the FDA power to reject new tobacco products, restrict advertising, and regulate nicotine levels. The FDA would be restricted from banning tobacco products or nicotine. Cole claims that the bill potentially faces a filibuster in the Senate.
Some politicians fear that consumers may consider smoking safe since the FDA will be overseeing the tobacco industry, but not banning cigarettes. “During floor debate, Rep. Steve Buyer (R-Ind.) argued that consumers might infer from an FDA stamp of approval that the tobacco products were safe” (Cole, 2009, para. 13).
Federal and state taxes on tobacco products results in enormous tax receipts. Taxes have been increased in hopes to increase revenue. Some states have found that increasing taxes results in a reduction in smokers and has resulted in loss of tax revenue instead of anticipated increases.
On April 1, 2009, the federal government increased cigarette taxes by 62 cents per pack, bringing the total federal tobacco tax to $1.01 per pack (Palmer, 2009). According to Palmer, profits from the tax hike are to be used to fund the State Children’s Health Insurance Program. As a result of the tax increase, Phillip Morris expects cigarette consumption to decline and increased prices in addition to the increase in taxes (Koch, 2009). Koch reports, “In the past, a 10% price increase reduced cigarette consumption about 4%, McKenna said. He expects the federal tax hike to prompt at least 1 million of the 45 million adult smokers to kick the habit.” (para. 8).
“State programs that receive revenue from the sale of tobacco are expected to see collections dwindle after a federal tobacco tax takes hold on April 1” (Palmer, 2009, para. 1). Palmer states that tax revenue from tobacco products in Arizona has decreased due to two tax increases in 2007. There is fear that the federal tax increase will further result in a decline in tobacco tax revenue for Arizona. According to Nothdurft, “Between 2003 and 2007 only 16 of 57 state tobacco tax hikes met or exceeded their revenue estimates. Opponents of cigarette tax increases say the revenue will continue to dry up because the tax base is narrow, tobacco use is declining, and high tax rates are already driving an increase in cigarette smuggling and untaxed purchases.” (Nothdurft, 2009, para. 11). According to the Tax Foundation, Texas increased cigarette taxes from 41 cents to $1.41 per pack on January 1, 2007 (Williams, 2006). Revenue from cigarette taxes in Texas nearly tripled as a result of the increase, reaching nearly $1.5 billion in 2008 (Texas Comptroller of Public Accounts).
Efforts on banning public smoking, increasing health alerts, filing lawsuits against the tobacco industry, and raising taxes on tobacco products has decreased the number of smokers in the United States, but the federal government has proven it will not ban cigarettes and will not allow the FDA to ban cigarettes, nicotine, or tobacco. With the federal and state governments dependant on tax revenue from tobacco sales, no-smoking advocates can not expect the federal government to seriously consider a nationwide ban on tobacco use. The U.S. war against the tobacco industry is a war that is likely to continue for many years to come.
References
American Nonsmokers’ Rights Foundation (2009, April 20). Overview list – How many smokefree laws? Retrieved May 20, 2009, from http://www.no-smoke.org/pdf/mediaordlist.pdf
Barbera, F. (2000, April 25). A tobacco lawsuit primer. Slate. Retrieved May 20, 2009, from http://www.slate.com/id/1005187/
Cantwell, K. (2008, Jan-Feb). A taxing dilemma. (National Focus). Tobacco Retailer, 11, 1. p.10(1). Retrieved April 17, 2009, from General OneFile via Gale PowerSearch.
Cole, R. (2009, April 3). House votes to put tobacco under FDA control. Los Angeles Times. Retrieved April 17, 2009, from http://www.latimes.com/news/nationworld/nation/la-na-tobacco3-2009apr03,0,317505.story
Koch, W. (2009, April 3). Biggest U.S. tax hike on tobacco takes effect. USA Today. Retrieved May 20, 2009, from http://www.usatoday.com/money/perfi/taxes/2009-03-31-cigarettetax_N.htm
Niemeyer, D., Miner, K.R., Carlson, L.M., Baer, K., & Shorty, L. (2004). The 1998 Master Settlement Agreement: A Public Health Opportunity Realized—Or Lost? Health Promotion Practice, Jul 2004; vol. 5: pp. 21S – 32S. Retrieved April 17, 2009, from SAGE Journals Online.
Nothdurft, J. (2009, June). New federal tax on cigarettes could hurt state tax revenues. The Heartland Institute. Retrieved June 5, 2009, from http://www.heartland.org/article/25257/New_Federal_Tax_on_Cigarettes_Could_Hurt_State_Tax_Revenues.html
Palmer, C. (2009, March 13). State of Arizona, federal cigarette taxes to hit $3 per pack April 1. Arizona Capitol Times. Retrieved April 17, 2009, from General OneFile via Gale PowerSearch.
Ramshaw, E. (2009, February 17). Texas Restaurant Association backs statewide smoking ban. The Dallas Morning News. Retrieved June 5, 2009, from http://www.dallasnews.com/sharedcontent/dws/news/politics/state/stories/021709dntexsmoking.40d6cad.html
Retirement Living Information Center. (2009, January). Taxes by state. Retrieved May 10, 2009 from http://retirementliving.com/RLtaxes.html
Saul, S. (2008, April 4). Appeals court panel throws out class action over light cigarettes. The New York Times. Retrieved April 17, 2009, from http://www.nytimes.com/2008/04/04/business/04tobacco.html
Texas Comptroller of Public Accounts. (n.d.). Revenue by source for fiscal year 2008. Retrieved May 10, 2009 from http://www.window.state.tx.us/taxbud/revenue.html
The Associated Press. (2005, February 4). Court sides with tobacco in fraud case. CBS News. Retrieved May 20, 2009, from http://www.cbsnews.com/stories/2005/02/04/ap/business/mainD881TDC00.shtml
Vicini, J. (2008, December 15). Court rules against Altria on light cigarettes. Reuters. Retrieved May 20, 2009, from http://www.reuters.com/article/domesticNews/idUSTRE4BE4RL20081215?feedType=RSS&feedName=domesticNews&pageNumber=1&virtualBrandChannel=0
Williams, J. (2006, June 8). Cigarette taxes on the increase in Texas. Tax Foundation. Retrieved May 20, 2009, from http://www.taxfoundation.org/blog/show/1654.html
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