The Tobacco Bill Fraud

Copyright 1998 Investor's Business Daily
May 21, 1998

Action this week on a U.S. Senate bill shows that lawmakers just can't keep their hands off tobacco money. But for all politicians' high-minded words, this bill will do little to curb youth smoking. Indeed, its design dooms it to fail.

Take the higher cigarette taxes planned. A Cornell University study found that $1.50 in added taxes per cigarette pack would cut teen smoking about two percentage points.

Why bother taking in, and spending, $516 billion for this meager gain?

The anti-tobacco forces say the bill would cut teen smoking by 40% to 50% over the next decade. Where are the other 38 to 48 percentage points going to come from?

The answer is: not from anything in the bill. The Cornell study adds to a heap of evidence that points to how fruitless it is to try to curb teen smoking with higher prices.

Authors Donald Kenkel and Alan Mathios looked at the effect of state cigarette tax hikes on teen smoking.

Take New York. In '88, the per-pack tax was 21 cents. Four years later, the levy rose to 39 cents. The share of youth smokers jumped from 6.6% of eighth-graders to 31.1% of 12th-graders during that period.

In Texas, 12th-graders in '92 smoked at rates more than five times as great (30.1%) as eighth- graders (5.6%) did in '88. And yet the state took in 41 cents a pack in '92, compared with 26 cents in '88.

That's not to say that smokers won't react to incentives. They'll go to the cheapest outlets to buy smokes, even when those outlets are out of state.

The Centers for Disease Control reported two years ago that adult smoking rates in Massachusetts and New Hampshire were the same. But it noted that the rate of cigarette purchases was more than double in New Hampshire - 158 packs a year in New Hampshire, compared with 78 in Massachusetts. The reason? Massachusetts' higher taxes.

Smuggling enters the picture. Canada's experience has shown that soaring tax rates drive customers underground. By '93, the Canadian government thought some 40% of cigarettes sold there were contraband. Canada rolled back many of the recent hikes.

Closer to home, New Jersey doubled its per-pack tax to 80 cents at the outset of this year. The move sent cigarette buyers west to Pennsylvania. Early estimates of New Jersey cigarette tax collections were off by nearly 50% from expected levels.

So higher taxes on smokers won't have a big effect on smoking. But that's OK with Washington. The bill requires tobacco companies to pay penalties - read taxes - if youth smoking doesn't fall to prescribed levels. Uncle Sam will just keep hitting up the industry for more and more.

And speaking of those prescribed levels, who will do the measuring? Will the figures truly reflect youth smoking? The bill's backers say yes, but again the facts suggest otherwise.

For instance, the University of Michigan survey on youth smoking that politicians rely on counts young people who smoke as little as one cigarette in the past month. But data show there are about as many kids who try cigarettes but don't get hooked as there are kids who do.

If the Michigan standard is used, then the picture of teen smoking is almost guaranteed never to improve.

What will this half-trillion-dollar tax bill fund? If the states are any guide, money will go to a host of hard-to-track programs that may not have anything to do with smoking.

The last time we checked, the National Organization for Women held itself out as an expert on women's rights, not smoking cessation. But amazingly, NOW has received more than $450,000 to "strengthen national tobacco control."

Naturally, the American Cancer Society and the American Lung Association get a lot of federal funds, too, for their anti-smoking efforts.

But what incentive would grantees have in curbing smoking, if it meant federal funds would dry up?

The irony is clear. On one hand, politicians want to get their hands on the money. But the methods they've chosen mean the money won't be there in the expected amounts. And teens will still light up in disturbing numbers. What a fraud.

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