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1 J. D. Foster, Justice v. Tobacco: Justice Loses 1 (1999)

handle is hein.taxfoundation/justobacxz0001 and id is 1 raw text is: TAX* FOUNDATION October 1999 Justice v. Tobacco: Justice Loses If you're like most Americans, you don't smoke. In fact, you may detest cigarette smoke and you may not have a very high opinion of tobacco companies. Even if all this is true, you should be appalled at the announcement that the U.S. Justice Department has filed a mammoth civil lawsuit against the major tobacco companies. This The Justice Department's lawsuit against tobacco companies represents a horrendous abuse of power harassment, andjustplain pathetic analysis. suit represents a horrendous abuse of power, harassment, and just plain pathetic analysis. The Justice Department builds its case primarily around two assertions. First, that the health effects of tobacco use cost the government an estimated $20 billion annually. Second, that tobacco companies fraudulently concealed the dangers of tobacco use and should therefore pay the government's tab. Let us accept at face value the Justice Department's allegation the government spends $20 billion annually on tobacco-related illnesses. These asserted costs are only one part of the picture. To start, these costs are partially offset by the federal government's receipts from the tobacco excise, estimated by the Congressional Budget Office at about $5 billion for 1999, and rising to about $8 billion by the year 2002. In addition to these offsetting receipts, there are important savings to the government from tobacco use. Any proper accounting of the cost to the government of tobacco use must address these admittedly unpleasant issues. For example, while tobacco use imposes large health-related expenses on the government today because smokers get sick, it also reduces those costs for tomorrow because smokers tend to die younger than non- smokers. The federal government pays over 80 percent of the health care costs of citizens over the age of 65. Also, because smokers die prematurely, as a group they receive fewer retirement benefits than non-smokers, yielding a significant saving to Social Security. And, because of their earlier morbidity, smokers incur much lower nursing home costs than do non-smokers. The federal government currently pays over 60 percent of the national tab for nursing home costs. When all these costs, tax receipts, and savings are calculated, it turns out the federal government saves about $29 billion a year in net health and retirement costs due to The early death of smokers saves the federal government billions of dollars in nursing home costs, Social Security costs and health care costs. On balance, it turns out the federal government saves about $29 billion a year smoking. To be sure, many estimations and assumptions go into the calculation of this figure. It could easily be off by $10 billion either up or down. Even so, the fact that the ByJD. Foster, Ph.D. Executive Director and Chief Economist Tax Foundation

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