Coughing Up Blood Money: Taxing tobacco, taxing credibility

Roll Call, the daily paper aimed at Washington politicos, gets endorsements such as the following from members of Congress:
Former House Minority Leader Richard Gephardt (D-Mo.): “Roll Call is a critical and indispensable tool for deciphering the day-to-day maneuverings of Capitol Hill. Roll Call has its finger on the pulse of Congress.”
Former Sen. John Warner (R-Va.): “I get a lot of information from Roll Call that I can’t find in other publications. I have to read it to keep my head above water in this town.”
When you want to send a message to Congress, you can take out a full page ad in Roll Call.

The tobacco industry did just that on January 13, one day before the House voted on SCHIP legislation. The State Children’s Health Insurance Program was due to expire, thanks to two vetoes by President Bush in 2007. It was hanging on by an Extension Act designed to keep it alive until March 31, 2009. The proposed expansion of SCHIP called for a 62 cent tax increase on a pack of cigarettes. The tobacco industry hoped to convince House members to vote no.

Whatever else you may think of the tobacco industry, their advertising campaigns have been memorable and effective. Some of the finest minds of Madison Avenue – the Mad Men — have attracted millions of Americans to Camels, Marlboros and Virginia Slims despite their known carcinogenic properties. The Roll Call ad did not appear to come from Madison Avenue, however. It reads more like an in-house job.
Granted it’s a little tricky to oppose health insurance for poor children. You can’t just come out and say that. And you can’t simply say “What about all that money we’ve contributed to your campaigns” — though a full page ad in Roll Call amounts to saying just that. In 1996, the year before SCHIP was first debated, the tobacco industry contributed more than $8 million to Republican politicians. Then, as now, the goal was to convince Congress that increasing tobacco taxes is something they really do not want to do.

Taxing tobacco will create an economic disaster

Tobacco industry opposes SCHIP

Click for larger view.

The Roll Call ad addresses Congress and the incoming president with “an urgent message.” The headline reads: “Taxing Tobacco Products to Expand SCHIP Will Lead to Economic Disaster.”
The preface to the four-point argument reminds readers that, unlike Wall Street and the banking industry, the tobacco industry is not asking for a government bailout. Well, I would think not. Tobacco companies are quite healthy financially, with revenues over $40 billion a year and a profit margin greater than 30 percent. A spokesman for Altria/Philip Morris, the leading U.S. tobacco company, was quoted in January as saying: “Especially when you compare with some other businesses, we’re in really good shape.” Statements from the tobacco industry on why cigarette taxes shouldn’t be increased need to walk a fine line between pleading poverty and pleasing shareholders.
Their first bullet point is that a tobacco tax would cause sales to decline 10% “in this recessionary economy.” It’s not clear if they mean people can’t afford cigarettes in a recession or if that’s a reference to spending our way out of the recession. Either way, the argument reminds me of the Republican report opposing the original 1997 SCHIP legislation. That report claimed raising cigarette taxes would decrease tax revenues, since fewer people would buy cigarettes, and this would hurt states that depend on that money.
Ted Kennedy, the bill’s original sponsor, responded: ”If fewer people smoke, states will save far more in lower health costs than they will lose in revenues from the cigarette tax.” Senator Orrin Hatch, who supported SCHIP to demonstrate that the Republican Party “does not hate children,” called his party’s report “absolutely preposterous.”
The ad’s second point is that the proposed tax will lead to increased illegal sales of tobacco products.
Next comes a plea on behalf of those employed by the tobacco industry, which would be forced into “devastating” layoffs. The ad talks about “small, family-owned retail” businesses, as if there are thousands of mom-and-pop stores that sell nothing but cigarettes. I don’t think so.
Finally, they get to perhaps their most creative argument: An increase in thefts and robberies will threaten delivery truck drivers and retail store clerks, similar to the “widespread crime wave during Prohibition years.”
At the bottom, in large type, all caps, there’s a “reminder” to the incoming president.

Your campaign promise to NOT raise taxes on Americans who earn less than $250,000 includes the vast majority of the 43 million American adults who buy tobacco products and have incomes of less than $40,000. These Americans cannot afford the additional financial burden of these exorbitant tax increases.

Well, yes. That’s actually one of the reasons for the tax: The government wants people to stop smoking. The tobacco tax, one might think, one might hope, is a means to that end. Nice to get confirmation from the industry itself that the reasoning is sound.
All in all, it’s a pretty weak bunch of arguments.
Not surprisingly, the ad failed to persuade its audience of Roll Call lawmakers. Next day, when the roll was called, the House approved the enhanced SCHIP legislation by a two-to-one margin. The Senate later added two amendments, which the House approved. President Obama signed the bill into law on February 4. Cigarette taxes will go up on April 1. No fooling.

President Obama signs SCHIP legislation, February 4, 2009. Senator Kennedy is present in spirit.

Source: UPI.com

Related post:
Edward Kennedy: Healthcare is a fundamental right, not a privilege