There is no better example of big business owning government than the transportation bill passed by Congress and signed by President Obama last month.
In an atmosphere tough to get consensus on the day of the week, agreement was reached at the 11th hour on a funding mechanism to repair America’s roads and bridges. The new law also eliminates the roll-your-own (RYO) cigarette business.
What, you may wonder, do cigarettes and tobacco have to do with roads and bridges?
The answer, of course, is nothing. But this is exactly the route Big Tobacco pursues when the intent is to screw the consumer with a minimum amount of fanfare.
Chief sponsor of the RYO-ending provision in the transportation bill is Sen. Max Baucus (D-Montana) who said he acted to appease Philip Morris, subsidiary of Altria, a large campaign contributor. He also said the provision classifies RYO shops as cigarette manufacturers “helping level the playing field among cigarette retailers.”
The latter is not exactly true but Sen. Baucus likely knew the excuse would fly past our Rip-Van-Winkle media.
Cigarettes manufactured by Big Tobacco are the subject of one of the largest and tightest American commercial monopolies in existence today. In multi-page contracts running 25 pages or more and not permissible before Reagan’s deregulation crusade, Big Tobacco tells retailers what they will sell and how they will sell packaged cigarettes and smokeless tobacco products.
For their efforts, retailers make about five percent and, in the case of smokeless items, may wait three months to get their profit in the form of rebates. Roll your own stores, on the other hand, charged two-to-three times the cost of tobacco and tubes for RYO cigarettes.
Congress more than doubled the federal excise tax on cigarettes in 2009 and raised the tax on RYO “cigarette” tobacco from $1.10 per pound to $24.78 a pound, killing an earlier version of the RYO business model. Perhaps as a sop to the Amish, the tax on pipe tobacco remained at only $2.83 per pound.
Consumers quickly learned pipe tobacco could be rolled into decent cigarettes of numerous blended flavors and were devoid of carcinogens that are more likely to cause cancer. One last problem remained. Using hand rollers meant rolling a carton of cigarettes might take three hours or more.
Soon electric rolling machines were developed, too expensive for home use, but suitable for sharing at retail shops. Now the consumer could roll a carton in a half hour and, without the excise taxes, at half the price.
Because the business is less than two years old, statistics are difficult. RYO did increase from three percent to four percent of the cigarette market from 2009 to 2010. Some retailers estimate the Baucus provision shut down about 4,000 stores and made 10,000 people jobless.
Retailers and consumers didn’t understand much about Big Tobacco and the government’s unholy relationship which began in November, 1998.
While not admitting that cigarettes kill people, Big Tobacco agreed, in a landmark settlement, to compensate states almost $250 billion over 25 years. Such an enormous amount, health nuts chirped, would choke Big Tobacco out of business.
Unknown then, Big Tobacco would raise cigarette prices and reduce retail margins by more than enough to pay the settlement with no government opposition. States and the Feds would also pile on excise taxes (known as “sin” taxes) rather than raise less popular taxes, a job retention feature for legislators. Each contribution to the higher prices for cigarettes would run interference for the other.
If the Baucus amendment survives an expected court challenge, there is one other unintended beneficiary. With more smokers dying at a younger age from inhaling carcinogens, the finances of Medicare should be improved. These smokers will pay into Medicare, then fail to live long enough to extract from the fund.
Big Tobacco, Big Money, Big Government, does this have anything to do with our failure to cure cancer?
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