The Attorneys-Generals' proposal to use public money to sue tobacco companies for the health costs of those silly enough to indulge the habit of smoking, is appalling. They no doubt have in mind the $250 billion USA tobacco industry settlement of 1997. That is a significant source of revenue! Trouble is, if the money is to be recovered from the smokers the manufacturers will have to stay in business. If they don't stay in business there will be no money! Suing a legal business as a hidden means of taxation is objectionable. State sponsorship of essentially private actions is expensive and risky. Why would government do it when they have the accountable and sure-fire means of taxation? The only issues for intelligent government are "is the amount recovered by government in tobacco tax, not otherwise covered by the smokers' own insurance, sufficient to the cover health costs of smokers and, are smokers aware the habit is bad for their health?"
Tobacco carries a particularly heavy burden of taxation. According to the Australian Institute of Health and Welfare the burden of that taxation falls particularly heavily on those who smoke most, the poor. The poor carry the burden because those who govern on their behalf think it would be better if they looked after their health. The tax is meant to price smokes out of the market. To some extent it has, and rates among the middle class have fallen, but more likely through peer pressure than price.
Do tobacco smokers pay their way? The Commonwealth's National Tobacco Strategy 1999, indicated that the net health care cost of tobacco use in Australia in 1992, the latest estimate, was $832 million per year. Figures from a 1998 Parliamentary library study indicate the tobacco tax revenues are in the vicinity of $4.5 billion per annum! It seems pretty clear that smokers more than pay their way and that governments benefit significantly from them. So, if Attorneys General are in the market for compensating those who suffer from smoking related diseases, their first port-of-call should be their own exchequers which have been over-collecting taxes from smokers for decades.
The Tobacco Strategy also mentions the total size of the $12 billion tobacco industry, including investment, production and consumption, as a "cost" to the Australian economy. To imply this level of savings to the Australian economy as if the industry did not exist is dishonest. As the buyers willingly pay for the product, the spending is no more a cost than is the spending on cars, beer or food.
Are smokers aware the habit is bad for their health? The Australian Institute of Health and Welfare National Drug Strategy Household Survey did not ask, presumably because it realized nobody could be ignorant of the risks! What the Survey did reveal is that 40% of respondents regard regular use of tobacco by adults as acceptable. Only a lawyer in pursuit of fame and fortune would believe a witness who said they were unaware of the dangers of tobacco. They are aware all right; they just want to avoid blame. If someone of authority tells them it is not their fault, and what is more, will give them a bucket of money for their troubles are they going to tell the truth?
So where does that leave our Attorneys General? If the legal substance tobacco is paying its way and the consumer is clearly aware of the dangers of the product, what business is it of government to use the public purse to pursue this, apparently painless, way of raising revenue?
Rather than trying to raise even more money from the poor using back door means the Attorneys could consider making insurance and health insurance premiums risk-rated. In other words, let those who smoke, pay higher premiums and the rest of us save. Unfortunately, this solution runs headlong into the equality problem. Those who can least afford insurance smoke most. Just as well we have community rating in Medicare, which prevents risk-rating on the basis of health status. In other words, Medicare is not health insurance at all, but taxation devoted to health expenditure. According to a 1999 Department of Health and Aged Care paper, this means that people on the lowest incomes receive about 3 times the benefits, and people in poor health receive about 15 times the benefits of people in good health.
So what are the Attorneys up to, some more moral posturing? More important, will they guarantee to return the money if the action fails?
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