$30 million in tobacco cash at stake

[shugah]

$30 million in tobacco cash at stake
Firms seek to cut payments to state

May 1, 2006

People are smoking less -- presumably a good thing for the health of Michigan and the nation.

But the trend could be bad for Michigan's budget because it could result in a cut of $30 million for college scholarships, health care for poor people and a new program to encourage high-tech investment.

The reason: two big tobacco companies, R.J. Reynolds Tobacco Co. and Lorillard Tobacco, are citing provisions in a settlement of health-related lawsuits to withhold a portion of this year's payments to Michigan and 45 other states.

The reduction would come because the companies have lost sales as smoking declines and as some smokers turn to cheaper products. It would cost all 46 states about $775 million.

~snip~
The 1998 tobacco settlement called for the tobacco companies to pay 46 states $220 billion over 25 years to compensate for the costs of treating smoking-related illnesses.

An independent consulting firm concluded in March that the companies could fairly reduce their payments under the agreement because new restrictions on cigarette advertising, promotion and marketing that were a part of the deal significantly contributed to their loss of market share.

http://www.freep.com/apps/pbcs.dll/article?AID=/20060501/NEWS06/605010400/1008/NEWS

[dipsydoodle]

1. This was an inevitability

We have similar circumstances in the UK but not as a rsult of the tobacco companies. We have substantial tax on tobacco products here. Years ago there was one instance where the government increased the tax by so much in their annual budget that the resultant decrease in smoking was somewhat more than they had anticipated and their gross revenue actually fell. Since then , with increasing concerns about health risks , annual increases have been less but their revenue continues to fall. So what ? - the anti-smoking brigade will cry. Well - the problem is that revenue from cigarettes etc has always propped up expenditure on our National Health service which of late is rapidly going down the Swannee through lack of funding.

It's one of these cases where you can't have your cake and it eat it too. All other factors remaining equal the tobacco companies , in your case, will almost equalise the penalties which were imposed on them.

[wakeme2008]

2. The same will happen in the US with the Gas Tax

As ppl turn to cars with better mileage, the income to the Feds and States will go down.

[dipsydoodle]

3. At the risk of sounding naive

it had never occured to me that you had any tax , aside from maybe State sales tax , on your fuel. The reason our fuel is so expensive in the UK is that a high proportion of what we pay is excise duty and value addded tax @ 17.5 %. You can infact get diesel at substantially lower price - it's agricultural diesel. Problem is it's a different colour and you'd arrested if you were found using it in a car. In reality they only ever check trucks although some of those are twin tanked - they switch when they drive over to Europe.

Broadly speaking we'd switched over to better fuel economy cars over the past 30 years or so out of plain and simple economic necessity.

You have used a very good analogy. The problem is , as you may well know , that if tax receipts from one source diminish then the bastards will get you from another direction. I recall my grandfather saying to me when I was kid that our economy is like a three legged stool. The legs are cigarettes, petrol and booze. If you take one away the stool falls over unless you compensate in another way. I believe that over the past few years your tax on tobacco has increased and now varies by State as well. When I was OH with my pal Linda a couple of years ago I noticed she stocked up when we went down to KY to vist her relatives down there. I'm still trying to figure how some counties in KY make up for the complete absense of alcohol tax if they are dry counties. I must confess that seems a complete farce if all you've got to do is drive a few miles down the road to TN to stock up with beer etc to add to the stocks from the family still and home brewed wine !