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Tuesday, October 18, 2016

RJ Reynolds Wants Higher Tobacco Taxes in Missouri, But Not California. Weird.

Posted By on Tue, Oct 18, 2016 at 6:42 AM

click to enlarge IMAGE VIA YOUTUBE
In Missouri, RJ Reynolds is spending millions of dollars to push a new tax on cigarettes. But Big Tobacco hasn't gone soft everywhere — the company is also spending millions to block a new tax on cigarettes in California.


That strange juxtaposition is the focus of a brand-new ad paid for by opponents of Amendment 3, the big new tobacco tax proposal on Missouri ballots next month as "Raise Your Hand for Kids." The ad highlights the tobacco giant's contrary positions on the states' proposed tax hikes.

In California, the company argues that the tax will be diverted to special interests. But in Missouri, the pro-tax campaign — funded largely by RJ Reynolds, which has kicked in $8 million, and counting — argues that the money can't be diverted, so bring on the higher taxes. (Never mind that, as backers acknowledge in legal filings, it will be subject to the usual appropriations process.)

What's really going on with RJ Reynolds' support for Missouri's tax increase? We'd argue its interest in pushing Amendment 3 has less to do with where the money is going and more with a fascinating provision within the details of the proposal — one that could make Joe Camel & Co. a whole lot of money.

That's because RJ Reynolds may be the biggest game in town, but it's not the only game. Off-brand cigarette companies, which offer cheaper cigs, enjoy about one-fourth of the market share in Missouri. And Amendment 3 would increase their cost even higher than their big-brand competitors. That's because it also slaps those smaller tobacco companies with a 67-cent "equity fee" on top of the across-the-board 60 cent increase. Say what?

The fee has its origins in the fact that a legal settlement requires Big-4 Tobacco companies to pay the state for some medical costs incurred by smokers. Smaller companies don't. But tacking on that fee on top of the tax would raise the cost of off-brand cigarettes a staggering $1.27 per pack instead of the 60-cent hike name-brand companies would get. And it just so happens to make those cheaper cigarettes just about as expensive as a package of Pall Malls.

So what if smoking decreases in Missouri as the cost of a pack increases? With a bigger share of the market, RJ Reynolds could still be laughing all the way to the bank. No wonder they're spending millions to back this thing.

So enjoy the new ad mocking Big Tobacco's contrary strategies in California and Missouri. There's always a reason for-profit companies start paying big money to push ballot proposals, and it almost never has to do with altruism. That's not the American way. Supporting something that sounds good for the children but actually takes out your competitors? Now that's more like it.

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