Reacting to the recent Philip Morris decision (PoL Dec. 15, etc.), the columnist is in righteous form:
The Illinois Supreme Court’s ruling stimulated the market for “tobacco-revenue munis.” Those are municipal bonds backed by tobacco revenue streams resulting from a real fraud — the Master Settlement Agreement. In 1998, 46 states conspired to seize $246 billion from companies that sell products made from a commodity — tobacco — the cultivation of which was then subsidized by the federal government….
The MSA is a deal struck between the state attorneys general and trial lawyers. For the latter, it was a financial windfall, netting about $13 billion in fees that sometimes amounted to tens of thousands of dollars per hour of work. For the former, it was a political windfall, enabling their states to finance this and that with billions paid by smokers, who are disproportionately low-income people….
The states’ ability to continue treating the tobacco industry as a “budgetary Alaska” — the last frontier for exploitation — depends on brisk sales of cigarettes far into the future. So all 50 states, which in 2004 reaped $12.3 billion in cigarette taxes, have an incentive to carefully calibrate these taxes so as to maximize revenue. They want high taxes, but not high enough to cause large numbers of smokers to quit the habit that is so lucrative to states.