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Addicted to Tobacco

Ban smokes? The thought gives jitters to governments hooked on the revenue.

June 18, 2003|Tommy J. Payne | Tommy J. Payne is executive vice president for external relations for R.J. Reynolds Tobacco Holdings Inc.

Surgeon General Richard Carmona uncorked a genie's bottle of political hypocrisy with his recent comment before Congress that he would support banning tobacco products.

Why didn't such a bold, sincerely delivered statement, coming from the nation's top physician, win him any measurable praise from the anti-smoking lobby and politicians who have long decried smoking? Leaving aside issues of individual freedom, adult responsibility, social engineering and political correctness, the answer may lie in that famous piece of advice: "Follow the money."

Carmona, perhaps unintentionally, revealed the ultimate game of wanting to have it both ways. The government is "addicted" to tobacco revenue.

Between 1998 and 2002, state, federal and local government collected nearly $135 billion from U.S. smokers, who, according to our data, have a median annual household income of about $35,000. Government pockets more tobacco revenue per minute than the average working family brings home in a year. About 47% of the cost of an average pack of cigarettes goes to government. In contrast, my company, R.J. Reynolds Tobacco, makes a profit per pack of about 3%.

State governments are particularly dependent upon cigarette funding. If the surgeon general were to get his wish, for example, California would stand to lose $2.3 billion annually. New York would be out $2.1 billion. Texas would fall short by $1.7 billion and Michigan more than $1 billion.

In 2002, 44 states faced budget deficits. Twenty of them increased cigarette taxes to help make up the difference. To date this year, nine states have increased cigarette taxes.

It's a good thing that a suggestion that amounts to a ban on this enormous revenue stream came from a physician. A number of state governors might need CPR if they were told they'd lost their state tobacco revenues.

Ironically, even the anti-smoking lobby didn't warm up to the concept of banning cigarettes. Perhaps that's not as surprising as it might seem. Revenues from taxes and the Master Settlement Agreement between the states and major cigarette manufacturers have provided more than $2 billion in funding for youth nonsmoking programs and other tobacco-control activities; many of the anti-smoking groups receive a portion of these funds.

Entirely apart from the government's financial dependence upon tobacco, banning a product used by nearly one-quarter of the adult U.S. population is a dicey proposal at best.

Is it realistic to believe that more than 40 million Americans would just quit smoking? The black market created by such a move would make "The Sopranos" look like a bunch of choirboys.

So, in supporting the abolition of the government's golden goose, did Carmona lay an egg? Perhaps not. He deserves credit for raising an intellectually honest question: Should cigarettes remain legal for adults in this country? If so, should they be manufactured and sold by a government monopoly, as in some nations, or by private enterprise? And if it's to be private enterprise, how should the manufacture and sale of a product with known health risks be regulated?

Among other things, current proposals to give the Food and Drug Administration authority to regulate cigarettes could be tantamount to granting Carmona his wish. The U.S. Supreme Court has already ruled that, as currently chartered, the FDA would be obligated to ban cigarettes.

There are reasonable regulations that could be placed on U.S. cigarette manufacturers, in addition to those already in force, that would serve the public interest -- for example, uniform good manufacturing practices, consistent standards for ingredients and their disclosure, and rules for communicating tar and nicotine yields.

But reasonable federal regulation should not include restrictions that restrain legitimate competition between manufacturers for adult smokers' business, nor should it lead to de facto prohibition by requiring that cigarettes be made in such a way that they become unpalatable to the adults who choose to smoke them.

Perhaps the best characterization of the reaction to Carmona's position is this: Be careful what you ask for. You just might get it.

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