Déjà vu Tobacco Lawsuit Seeks $280 Billion Tax

Contact: Christine Hall, 202.331.2258<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

Washington, DC, September 20, 2004—As the U.S. Department of Justice preps for a showdown against major tobacco companies on Wednesday, it’s government coffers that will benefit—not the public.


“The federal government’s $280 billion tobacco suit is merely 'Act II' of an ongoing political campaign to shake down a politically unpopular industry,” said Sam Kazman, general counsel of the Competitive Enterprise Institute.  “'Act I' was the brazen, unprecedented lawsuits launched by dozens of state suits against tobacco companies in the 1990s.  The winners back then were trial lawyers, state coffers, and, ironically, big tobacco companies themselves.  The losers were consumers and the democratic process.


“If the federal government now wants to impose new regulations and consumer taxes, there should be a public debate and a vote in Congress,” said Kazman.  “But taxation through litigation is nothing more than an abuse of power.”


When the 'Big Four' tobacco companies settled the state lawsuits with the Master Settlement Agreement, the result was a $240 billion tax on consumers, a windfall for politically connected trial lawyers, and increased state dependence on tobacco money.  Tobacco may be addictive to smokers, but tobacco money has proved far more addictive to politicians.  Contrary to the claims of state officials in 1998, states have spent the settlement money mostly on budget shortfalls and programs unrelated to smoking health issues or cessation. 


Now, the DOJ racketeering suit seeks $280 billion dollars from the companies—costs that would again be passed onto consumers—along with advertising and other restrictions that are redundant to the terms of the 1998 settlement agreement.


The DOJ suit, which was initiated by the <?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Clinton administration in 1999, accuses major tobacco companies of defrauding the American public, including devising schemes for marketing to children.  In addition to seeking certain restraints on future industry conduct, consistent with the intent and wording of the Racketeer Influenced and Corrupt Organizations Act (RICO), the government is also seeking a remedy not set forth by the RICO: revenue from sales to addicted smokers since 1971 (the year RICO was enacted).