7/12/2004

Who’s really going to pay?

There seems to be a never-ending attack on any company that is classified as being ‘big”. Big in the monetary attack refers to the big pockets these companies are perceived to have. Therefore attacking “big” can usually turn into “big” payouts. Take the tobacco industry for example; on top of the $246 billion they have already agreed to pay the states, the government is now trying to pick another $280 billion out of “Big Tobacco’s” pockets. A recent article on the website Economist.com addresses the issue.
For those that don’t smoke this type of action doesn’t mean much and the consensus runs against those that do. Why shouldn’t tobacco companies pay higher amounts to states that have to offset medical costs paid out for smoker health care? The truth unfortunately is that more than just smokers are paying these costs. As the number of smokers in this country dwindles due to all the pressure and regulation, tax revenues that were assumed guaranteed to the states are dwindling. Programs that have been initiated with this money now are trying to have these funds guaranteed by the rest of the tax paying public. The other side of the coin doesn’t look any brighter. For the most part those that smoke are usually in the lower wage earning bracket and raising the price to cover the government suits takes more of their disposable income. The government might think that they are doing the ethical thing by trying to reform smokers, but one is led to question if this attack is working? According to the article, Big Tobacco’s new strategy: to spend less time trying to flog cigarettes in rich countries and instead seek consumers in the developing world, and especially in the young and fast growing markets of Asia.
There seems to be no winners here (except trial lawyers), only losers.

5 comments:

C-Dizzle said...

Rolf mentioned that the amounts of smokers in this country are dwindling because of pressure and regulation which brings in less government taxes levied on the cigarettes. If there is less money coming in to the states through taxes on cigarettes and fewer smokers shouldn’t the size of the cigarette tax still be relative?

I do not think that the general public should be responsible for paying the difference in lost taxes to the states because of lost smoking taxes. If there’s less smokers, there should be smaller smoking programs.

Regarding the 246 billion dollar payout slammed on the tobacco industry, that’s great. (As you can tell I’m not an advocate of smoking.) The tobacco companies should be responsible for the extreme externalities created by their products. As long as the 246 billion is used properly for smoker’s healthcare and whatever else it was promised for, I’m all for the payout.

The 280 billion is a different story. Rolf mentions that this new lawsuit against the tobacco companies is just a ‘get more money’ lawsuit but after reading the article link provided, I feel somewhat otherwise.

While the lawsuit may have some intentions of just getting money, I agree with the governments reasoning for going after the industry again. “The $280 billion suit now rests on alleged breaches of the Racketeer Influenced and Corrupt Organizations (RICO) act. The industry stands accused of breaking the terms of the 1998 states’ agreement, which imposed restrictions on advertising and marketing; of fraudulently recruiting new smokers; and of misleading the public about the risks of passive smoking and so-called “light” cigarettes.” If they in fact made a breach of contract as stated, I say nail the industry!

As for justifying the amount the lawsuit is seeking, without knowing the financial ‘ins and outs’ of the industry, it may be fair. Do you think that a $100,000 fine to a trillion dollar industry is really going to scare them or persuade them not to break contracts? I don’t think so. You’ve got to reach out and slap the industry into remembering their contracts and deals by taking from their pocket books.

Jules said...

While I agree with C-Dizzle that the tobacco companies should have to pay out I don't agree with them paying for medical expenses for smokers. Everyone who smokes knows about the health hazards of smoking, they either don't care or believe the pleasure they are getting from smoking is worth the risks. The article also mentioned that a Louisiana court has ordered the industry to pay $590m for a public-health program to help smokers quit. While the industry is appealing this ruling, this is exactly what the tobacco industry should be paying for. Not only will they be hit in the pocket book but they will be paying to reduce their own customer base. A much smaller amount of money in this area will get the attention of the tobacco industry much faster than a large fine to pay for medical expenses, especially considering that the people receiving medical treatment often don't quit smoking. I don't know who currently pays for the treatment programs but I believe they are funded by the health department. This means that non-smokers are helping to pay for "the patch" for people trying to quit. Shouldn't the tobacco companies share in this cost?

micahnay said...

I strongly agree with both C-Dizzle and Jules, except that not everyone knows the negative effects of smoking. My grandfather was a brilliant man. He made a fortune off of real estate investments he made during the great depression while working at a school in Northern Utah as a shop teacher. Even though he was really smart, he did not know that every time he lit up, that he was cutting his life short. Tobacco companies made up studies that showed that smoking was not harmful. Because these studies looked legitimate, people like my grandfather believed that nothing was wrong. Because of this, I do think that the tobacco should not only pay for the expenses that the state and families met, but they should also pay for those wrongful deaths. On the other hand, I think that it would be very hard to find a person in America today that doesn’t know that smoking is bad for them. In these cases, I believe that the tobacco companies are not responsible. If we made tobacco companies pay for lung cancer caused by smoking, we would also have to make hamburger companies pay for heart attacks and other health problems related to obesity. I think that our country has gone way too sue happy. Jules is right; the only ones that are benefiting are the personal injury and trial lawyers. I believe that if our government wants to make the statement that no one can harm people, not even multi-billion dollar corporations; they should just shut them down. They made heroine and cocaine illegal because they aren’t good for people, so why aren’t they doing the same with tobacco products?

Ned said...

This is another example that if you change one thing, it effects a lot of other things. Kind of like dominoes. We've relied heavily on tabacco tax, and now we're feeling the hit of the declining tobacco market. I also don't like the idea of having to pick up the tab for declining tax income. While it may be fair to demand huge amounts of cash from these companies, that'll have repercussions as well. We can "make them pay", but just like the ideas of many politicians, it may help in the short run, but hurt in the long run.

Senator Miller said...

I agree with this blog. I don't think the justice system was ever meant to distribute wealth from people or businesses with too much money. It seems odd that the states continue to win over the Big tobacco companies for their contribution to the health problems. It seems only logical that people that pick up a cigarette and smoke it are the ones responsible. If cigarrettes didn't sell as well as they do, they're wouldn't be any of these health problems. I think this is a good example of lawyers looking for "big pockets" to reach their hands in to.