How Big Tobacco Is Ripping off the Poor in Addition to Killing Them
The early 2000s marked the end of an era for New York City smokers. Michael Bloomberg came into office with an objective to improve public health, and he made reducing smoking rates one of his primary channels for doing so. Over the course of his three-term administration, Bloomberg and the City Council made New York the first major city to ban smoking in bars and restaurants, abolished smoking in outdoor public spaces, raised the legal age to purchase tobacco from 18 to 21, banned the use of electronic cigarettes indoors, and raised municipal cigarette taxes to $1.50 per pack. A pack of Marlboros that cost $7 in 2002 now goes for around $14, and the city has the second-highest combined state and local cigarette tax in the nation.
As Audrey Silk, founder of NYC CLASH, a smokers’ rights group, put it in a telephone interview, “His entire policy platform was not about creating a smoke-free society, it was about creating a smoker-free society. Bloomberg led a crusade to demonize smokers in the city.”
Yet these policies were not just some aberrant nanny state-ism. They were part of a concerted national effort, based on growing reams of evidence, to use high cigarette taxes as a means of driving down smoking rates. The most widely cited statistic claims that every 10% increase in cigarette prices reduces youth smoking by about 7% and total cigarette use by about 4%. According to the Campaign for Tobacco-Free Kids, a DC-based nonprofit, “Raising cigarette prices is one of the most effective ways to prevent and reduce smoking, particularly among kids.”
Besides the dramatic health benefits for individuals who stop smoking, reducing tobacco use creates a wealth of other positive effects. Smoking-related illnesses like emphysema, lung cancer and cardiovascular disease result in healthcare costs totaling some $96 billion per year, much of which is paid for with taxpayer money through government health programs. And because a relatively small percentage (around 20%) of the U.S. population smokes, raising cigarette taxes provides government officials in cash-strapped states and cities a relatively painless way to garner a new, reliable source of revenue.
Yet despite these benefits, the cost of cigarettes—and the tax politicians are willing to impose—varies widely from state to state. Unsurprisingly, some of the lowest tax rates can be found in conservative states like Missouri (17 cents per pack), Georgia (37 cents) and Alabama (42 cents), where the opposition to taxation and government intervention in people’s lives is stronger. Opponents of raising cigarette taxes claim that these fees are a prime example of governmental overreach and that the anti-smoking effort would be better served by investing in public education campaigns.
As Audrey Silk put it, “They can advise. They can offer services if they’d like. But once you start legislating behavior because you’re intolerant of it, that’s infringing on people’s personal choices.”
Fierce taxation battles between anti-smoking groups and tobacco lobbyists have broken out across the country in recent years. In 2012, the tobacco industry spent a whopping $47 million to defeat a California ballot initiative that would have added a $1 tax to packs of cigarettes. And in Philadelphia last month, lobbyists for RJ Reynolds and Altria Group—the two largest cigarette companies in the nation—managed to push a $2-per-pack tobacco tax into legislative limbo. The tax was intended to fund the city’s failing public schools, which are suffering from a $93 million budget deficit. Though the lobbyists were unable to kill the tax outright, they pushed through a provision that will cause it to expire in five years, undermining its utility as a solution for the school district’s financial woes.
The influence of the tobacco industry in defeating the Philadelphia tax couldn’t be more transparent. Republican Senator Jake Corman, chairman of the appropriations committee, said that the tax could lead to a reduction in the annual $2 billion Pennsylvania pulls in from tobacco revenue. Corman claimed he had “great concerns about what this could mean for the state.” He neglected to mention that his reelection campaign has already received $12,000 from tobacco companies this year.
Big Tobacco has played a subtler role in influencing taxation policy as well. The most common arguments against raising tobacco taxes—that these higher fees discriminate against the poor and lead to a spike in cigarette smuggling—are in fact red herrings fabricated and promoted by the tobacco industry. Because low-income individuals are more likely to smoke and spend a greater fraction of their household income on tobacco products than middle- and upper-class individuals, taxation opponents claim that higher taxes put an unfair burden on people who have less disposable income to begin with.
But as Stanton Glantz, a leading tobacco control researcher at the University of California, San Francisco, said in a phone interview, “For all the crocodile tears that the tobacco companies cry over the issue of unfairly hurting poor people, the fact is that the risks, the health costs, and the economic burden of smoking disproportionately fall on low-income individuals.”
In fact, tobacco companies often raise wholesale prices when cigarette taxes increase. This allows them to maintain their cash flow when smoking rates decline, while the tax provides a useful way to obscure the fact that they’re raising prices.
“All of these arguments have been ginned up and promoted by the cigarette companies with extreme hypocrisy,” Glantz continued. “They complain about the tax, and then leverage it so that people get mad at the government instead of them. It’s completely disingenuous.”
While Big Tobacco isn’t exactly known for espousing a strict moral code, the industry’s anti-taxation arguments are so warped and manipulative they seem like they were ripped from the pages of Thank You For Smoking. One of the other specters taxation opponents often raise is that higher cigarette taxes boost the market for interstate tobacco smuggling. A black market for tobacco would, of course, undermine states’ ability to collect tax revenue and to control sale to minors.
But despite these fears, there is little hard evidence that this kind of rampant smuggling is actually happening. Granted, smuggling is an illegal activity so it is difficult to find accurate studies on the subject. But much of the research reporting dramatic spikes in smuggling rates was directly funded by the tobacco industry. And in some cases, tobacco companies themselves have been behind smuggling efforts. Back in 1999, the Canadian government filed a $1 billion lawsuit against RJ Reynolds for an elaborate scheme that involved shipping heavily taxed Canadian-manufactured cigarettes into the U.S. and then smuggling them back into Canada through an Indian reservation that straddles the Ontario-New York state border.
According to Glantz, “Industry leaders could stop smuggling in the blink of an eye if they wanted to, just by using tactics like modern product tracking. This isn’t some wildly high-tech invention; it’s the same thing that FedEx and other companies use to track the millions and millions of packages they’re shipping around the country at any given moment. If the tobacco companies adopted this existing technology, they could follow every pack of cigarettes from the factory to where it actually gets sold.”
Tobacco executives have an obvious instinct for self-preservation and aren’t going to start pushing for more stringent oversight or higher tobacco taxes anytime soon. Cigarette taxes aren’t the only way to raise revenue for hard-pressed municipal budgets, and they won’t prevent all smokers from kicking the habit. But when politicians, columnists and “non-partisan” think tanks are spewing the exact same talking points as RJ Reynolds and Philip Morris, it’s clear something isn’t entirely right. And when a multimillion-dollar industry is disseminating propaganda that prevents school districts and infrastructure projects from receiving funding—while also contributing to the illness and deaths of hundreds of thousand of Americans each year—the arguments against raising cigarette taxes start to fall apart.