Originally posted by MysterEI think your reasoning is good, other then the fact that the govt. isn't in the business of selling
tobacco. Now, state govt's do benefit as you stated by the additional tax, but I don't think this legislation was specifically aimed at that. The
timing is too coincidental with the health care legislation on the table. You said "follow the money", and as I said earlier, the govt. ins't
directly in the tobacco business, but they soon will be in the health care business.
On the contrary. Tobacco is the 2nd largest revenue source for the US Treasury, exceeded only by Excise Taxes on Gasoline. The Federal government
receives revenue from Tobacco not only from Federal Taxes on Sales, but also Federal Excise Taxes on Imports, Federal Taxes on US Tobacco Industry
Revenue, and Federal Taxes on US Tobacco Industry Employee Wages.
The CDC calculates the estimate cost of smoking in the US to come out to $96 Billion/yr in Health Care (which is not yet a liability to the Federal
Government, but will be if we adopt Socialized Healthcare) and $97 billion/yr in lost productivity (read potential lost Taxes on Wages due to
decreased life-span). Only 22 billion packs of cigarettes are sold domestically in the US, so this comes out to be $3.45/pack in potential Health Care
cost and $3.73/pack in potential lost productivity, which we tax $2.92/pack directly, coming out to a seeming loss of a potential $4.16/pack to the
Federal Government (again, this is a hypothetical loss assuming fully Socialized Healthcare). Yet when you include all the other Taxable Revenue
sources attributed to the growing, manufacturing, and distribution of that pack of cigarettes, the US Treasury still receives a Net Gain of $0.32 per
pack of cigarettes sold in the United States (or $7.04 billion dollars annually) under this estimate. This also does not include the consideration of
Tax Revenue from raw Tobacco or Exports.
On top of this, the US Tobacco companies pay the States $24.6 billion/yr in Settlements (having paid $203.5 billion in the past 10 year since the
DMA).
Still, this is chump change.
Now, let's get to the big bucks of where the US profits from this new Tobacco Law...
We export 191 Metric Tons of raw Tobacco a year. We import 241 Metric Tons of raw Tobacco a year, giving us a Net Import of 50 Metric Tons.
We export 170 billion pounds of cigarettes a year but import 200 billion pounds of cigarettes a year, giving us a Net Import of 30 billion lbs.
By effectively banning Imports (by using the FDA instead of Trade Embargo) we have turned this into a Net Import of -191 Metric Tons of raw Tobacco
and -170 billion pounds of cigarettes a year, all of which means higher Capital Gains for the entire Tobacco Industry in the United States. This means
the Tobacco Industry in the United States will now have to produce 432 Metric Tons of raw Tobacco a year, and and ramp up to producing 370 billion
pounds of cigarettes a year to make up for this difference in Net Import. This effectively more than doubling the US Treasury's Revenue, making
Tobacco now the number one revenue source for the US Treasury. It also means that a huge amount of US jobs are created to help assist in this more
than 100%+ increase in US Tobacco production.
Name me any other industry that can turn a 100%+ increase in Revenue and Taxes!
The US Car Industry and Wall Street combined don't equal the amount of Revenue that the US Tobacco Industry represents to the US Treasury!
You can consider this Legislation to be the US Tobacco Industry's Bail Out, the only difference is that it is making both the US Tobacco Industry and
the US Treasury fat off the deal, at the expense of foreign Tobacco Industries and US Consumers.
Of course, this will only last until the WTO rules on this, as Indonesian Kretek Manufacturers have already asked for Economic & Trade Sanctions
against the U.S. Still, the US Treasury and US Tobacco will profit greatly off of this scheme for a couple of years until then, and hopefully by then
the US Economy will have recovered enough to handle things going back to the way they were prior to this law.
[edit on 26-6-2009 by fraterormus]