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By Dave Buckley
As I site here preparing for the latest round of Tax proposals and regulations on vapor products, I find myself wondering what the true cost of tobacco really is, and what (if any), reasons might there be for State governments to support the user of traditional tobacco?
A look back:
In 1999, 47 out of 50 states signed into law the Master Settlement Agreement, more commonly known as the MSA. The MSA allows each state to collect revenue from Tobacco companies to offset the costs associated with tobacco consumption. Written into the MSA were also two clauses that most people are unaware of, 1.) Consumers within these 47 states may no longer sue or take legal action against tobacco companies for damages, injuries, disease or death in relation to tobacco, and 2.) Tobacco products may not be outlawed for sale in these states.
The effect of the MSA:
For those states who signed into law the MSA, there was an unintentional side effect. These funds were added to the state budget, used for things like Education, Health Care, Transportation and other social concerns. Eventually these states began to rely on this additional income, requiring that tax revenue from Tobacco is collected to maintain the budgetary status quo. Some of these states, even went so far as to take out loans, anticipating continued revenue from tobacco. These funds in addition to those gained through MSA payments for a time ensured that State funding requirements could be met.
The trick of course would be ensuring that the smoking population was maintained. Since we know tobacco use leads directly to illness, disease and eventual death it didn’t’ take to long before the amount of people paying a tobacco tax went down. Which caused the states to increase their Tobacco tax, making fewer people pay more.
Meanwhile multiple industries, primarily the medical and pharmaceutical, were profiting from the symptoms associated for tobacco use (note: not cures to address the overall behavior). Over time these industries would grow to become cornerstones of the economy, within local states and the federal government. Intentionally or not, these institutions worked towards addressing the symptomatic problems associated with smoking not the behavior of Tobacco consumption. The by product being a co-mingled economy that relies on revenue generated from Tobacco consumption through Tax. To continue generating revenue even the Healthcare and Pharmaceutical companies required the symptoms from tobacco use continue.
After years of co-mingling financial interests, and politicians using Health Care and Pharmaceuticals to secure funding for their own interests and benefit, the game changed. As a result, this shifted tobacco consumers from being a detriment to the state’s economy, to be a requirement.
Then the game changed when a Chinese Doctor innovated the Electronic Cigarette creating the first meaningful alternative to smokers and tobacco user’s everywhere. What this caused however was a large volume of smokers transitioning away from tobacco, which means less revenue from tobacco tax.
With the rise of the Vaping movement millions of Americans are choosing an option that is less damaging. For the first time in our countries history we see a meaningful reduction in the smoking population. Some states even saw as much as a 5% reduction in their smoking population within a years’ time. As you can imagine, for those 47 States who budgeted and forecasted to have tobacco these reports were not good news.
As an example, in Washington state, we saw an immediate impact on our ability to properly fund Education. This even went before the Supreme Court which ruled; Washington had failed to properly fund education and continues to penalize the state $100,000.00 a day until this requirement is met. This penalty has been applied every day, since January 14th, 2014 (current costs as of this article being $146,996,000.00 to Washington state taxpayers).
This also gave rise to a rather large economy centered around the effects of tobacco. This industry is currently worth over $170 billion in direct medical costs in the United States per year, and every state who signed the MSA is beginning to feel the weight of this added financial burden. In Washington, a state which makes up 2.3% of the countries population our share this burden is $3.91 billion dollars or $3,128.00 per tobacco consumer in Washington State.
The scary truth, is $170 billion, isn’t the complete cost of tobacco use. The true cost of smoking is over $300 billion per year, which means states like Washington are on the hook for a stunning $6.7 billion dollars. These are funds are taken out of the states available budget through medical expenses, time missed from work due to illness, or injury, lost productivity and countless other areas. In Washington, the smoking population makes up roughly 17.5% of the population or, 1.25 million people. With some simple math we can discover that each tobacco consumer is worth $5,520 per year or $15.11 a day in revenue.
People who choose to use nicotine have been ostracized, demonized and often used as a scape goat throughout the political process and discussions about economics. After decades of harassment, heckling and torment tobacco consumers accepted and transitioned into the emerging technology of vaping. Choosing to better their lives and step away from the harmful effects of tobacco. For years these people have heard that, because of their tobacco use taxes must be increased to off set the costs of smoking. However, this has never been the case, if this were the case each pack of Cigarettes in Washington would have a tax of at least 17.00 to offset the costs of the 6.7-billion-dollar tobacco industry in the state.
In the end, by choosing to tax Tobacco our country has ensured its economic reliance the industry and 47 states are barred from ever ending tobacco sales. Now in states like Washington, politicians, special interest groups, lobbyists and other all via for their piece of the pie at the expense of the American taxpayer.
What the vaping movement has caused, is a wide spread exodus from smoking. Millions of Americans are realizing the truth, that vaping is proven to be a 95% safer option (Royal College of Physicians, England). These people are choosing to make steps to improve their own lives, and minimize risks to their health. Only to find their Representative and Senators actively working against them to protect their financial backers, and a 300 billion dollar a year industry.