22 Jul 1999 Press A Federal Tobacco Lawsuit is Bad Economics, Bad Law & Bad Governing

A federal lawsuit against tobacco companies would be bad economics, bad law and bad governing, says a new National Policy Analysis #255 paper just published by The National Center for Public Policy Research.

The paper points out several problems with President Clinton’s proposed federal lawsuit:

* Economics: The President’s allegation that government loses money because citizens chose to use tobacco products is bad economics because government actually profits from tobacco sales more than tobacco companies do. Nationally, government saves an average of 32 cents for every pack of cigarettes sold. This figure excludes the average 53 cents per pack government takes in from tobacco taxes and the value of the $246 billion tobacco settlement with the states.

* Law: A federal lawsuit against tobacco companies probably would not win. Attorney General Reno herself has said that there are no legal grounds for this suit.

* Governing: According to Senator Judd Gregg (R-NH), an anti-tobacco politician who chairs the Senate subcommittee with oversight over the Justice Department’s budget, the Justice Department’s legal division is already overworked, and, so the government can stay within the balanced budget caps, the Justice Department is facing a budget cut this year. Pursuing this suit would take needed resources away from other Justice Department projects that are more likely to succeed.

"Even in the unlikely event that the federal government files and then wins or settles this lawsuit," said Amy Ridenour, president of The National Center for Public Policy Research and author of the paper, "the poor and lower middle class will pay for most of it. Tobacco companies will raise the price of cigarettes to pay for the suit, making any award or settlement an indirect tax on smokers. Fifty-three percent of all federal tobacco taxes are paid for by people who make under $30,000 per year, and only 7 percent by people making over $75,000 per year."

"An even greater concern about this proposed lawsuit is that the executive branch of the federal government does not have the power to impose taxes," said Ridenour. "Article I, Section 8 of the Constitution grants to the Congress, not the executive, the power to raise taxes. President Clinton is asking the Congress to grant the Justice Department $20 million to spend suing tobacco companies in an attempt to raise revenue. This is an attempt at a tax increase by other means. Instead of fighting to get Congress to allocate funds to sue tobacco companies, the President should simply fight to get Congress to raise tobacco taxes. This strategy is more likely to achieve the President’s goals and it sets no dangerous constitutional precedents."

National Policy Analysis #255, "A Federal Tobacco Lawsuit: Bad Economics, Bad Law and Bad Governing" is available on the web at http://www.nationalcenter.org/NPA255.html or from David Almasi at (202) 507-6398 x106 or [email protected].