The Best Gift For The Weekend Article Summary
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Published: March 22, 2008
The largest civil settlement in history totaled $246 billion,paid out over 25 year.The tobacco master settlement agreement was signed in 1998 by tobacco companies, and it details payout to all 50 states and six U.S territories.
In addition to the huge financial burden, the master settlemnt also prohibits tobacco companies from tatrgetting young people,bas cartoons form tobacco advertising, restricts brand sponcership of teams and events,eliminate out door and public- transit advertising,restricts lobbying,and requires tobaccocompanies to disclose internal documents to the public.
All 50 states and the district of Colombia prohibit the sale of tobacco products to minors.Idaho and Washington prohibit the distribution of samples to the genaral public at little or no cost.
At least 10 states have imposed bans on smoking in bars(!) and resturents.In Baltimore''s Inner Harbour area,you are not allowed to smoke anyywhere , inside or out.
It all sounds like more than enough reason to saty away from tobacco stocks.
On the other hand, there is an important detail that most people don''t know about the 1998 agreement.The master settlement payments rise and fall with cigarette shipments.If cigarett volumes go down,the payments go down.But if the volumes go up.. payments go up even more.It''s a perverse paradox;Your state government hopes you smoke like a chimmney,and it-not Big Tbacco- is going to gouge you for the privilege.
Big Tobacco''s payments to politicians and lawmakers don''t end with the master settlement.Federal and state taxes kick the payoff upanother notch.The federal excise tax is $19.50 per thousand cigarettes,or about $0.39 a pack.In 2007, combined state and municipal excise taxes rangd from $0.07 (Soouth Carolina) to$3.66 (Chicago) per pack of cigarettes.Last year,10 states increase taxes, adding another$0.20 to $1 per pack.
Between high state excise taxes and the mastersettlement, tobacco companies have become a bizarre sort of utility company. Let me expalin a public utility is really just a good business intowhose packets and affairs the government has permanently intruded, but whose survival is thererby assured. State governmnets make more money off each pack of cigarettes than anybody.If big tobacco fail, municipalties all over the United States fail.
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