A Smoke-Free Backroom Deal

In their March 11 article, “Tobacco Money,” discussing the 1998 Master Settlement Agreement (MSA), the Tulsa World editorial writers asked the question, “so what’s the problem?” Whether that question was rhetorical or not, I intend to answer it.

The World misrepresented the facts of the MSA as well as the intentions of the lawsuit brought by the Competitive Enterprise Institute (CEI). There were two constitutional objections raised; the World only mentioned one.

First, the settlement created protections for the large tobacco companies, allowing them to pass the costs of the settlement on to the consumers — establishing a de facto national sales tax. Do not be fooled, it is a tax. The prices of consumer products are being raised and the money is ending up in the hands of governments. The fact that tobacco companies are acting as tax collectors makes it more insidious. Cartel-creating protections are illegal, and the only people authorized to levy national taxes are congress.

Second, this settlement is a contract between 46 state attorney generals and the largest tobacco companies which was entered into without the consent of congress. Named by Jonathan Rauch in the National Journal as the “constitutional crime of the [20th] century,” this action directly violates the compact clause of the constitution.

Article 1, Section 10, “No State shall, without the Consent of Congress… enter into any Agreement or Compact with another State…”

Additionally, that the Supreme Court chose not to take up the suit does not mean they were weighing in on the validity of CEI’s claims, as the World alleges. The Supreme Court only hears between one and two percent of the cases sent to it on appeal. To think this means the court is deciding against the appellants of the other 98 percent of cases is erroneous and misleading.

The World concludes that this settlement, regardless of the outstanding questions to its constitutionality, is a good thing because Oklahoma will continue to receive payments. From a consequential perspective, that is an incomplete assessment. If you take the total amount of money leaving the state through the tobacco tax-collecting weighed against the settlement payments coming back into the state, Oklahoma has had a massive net loss. Stanford Business Professor Jeremy Bulow estimated that this deal cost Oklahoma over $70.5 million in 2003 alone.

The problem is that not only is the MSA constitutionally fraudulent and the World’s argument factually wrong, but the notion that Oklahoma should participate in this “smoke-free”, back-room deal is a moral blight on the state. The World discussed the need to discourage young people from taking up smoking, but what about the need to teach young people honor?

How can you advocate for Oklahoma’s future without accounting for the social cost of tainted money? “Tobacco may be addictive, but tobacco money is even more addictive,” warned CEI’s general counsel Sam Kazman.

In closing, the World called CEI a “special interest group” — a term with little meaning except that the user doesn’t like the organization. In fact, CEI is a free-market think tank. In this particular case, CEI was representing a discount tobacco company, a small tobacco shop, and an individual smoker against the combined interests of 46 state attorney generals and the largest tobacco companies comprising 99 percent of the industry.

Having lived in Tulsa for over 10 years, attending high school and college in Tulsa, and now working at CEI, I find myself in a unique position in regards to this issue. Oklahomans should be told about where this money is coming from, and encouraged to fight for principles instead of special deals.

I submitted a letter to the Tulsa World on this topic. Unsurprisingly, it was not published.