In August the competitive enterprise institute filed a lawsuit challenging 1998’s $206 billion tobacco Master Settlement Agreement. The case is likely to end up in the Supreme Court, and the justices should throw the settlement out. It’s nothing more, as CEI General Counsel Sam Kazman puts it, than a “lucrative backroom deal between state attorneys general and the trial bar. It has created a new model for targeting other politically incorrect industries and their customers.” The institute, a Washington, D.C. free-market advocacy group, charges that the agreement violates the constitutions compact clause (article I, section 10), which states that agreements between two or more states must be ratified by congress.
The settlement is obnoxiously objectionable on a number of counts. It, in effect, imposes a national sales tax on cigarettes without the formal approval of congress. It sets up a de facto industry cartel; small cigarette manufacturers not covered under the original settlement are now forced to make payments to a settlement fund. If this isn’t a violation of antitrust laws, what is?
The settlement smacks of the old tax-farm system used in medieval Europe and ancient states: the kings or emperors would action off rights to collect taxes in certain territories. So-called tax farmers would then squeeze the peasants for all they could, remitting part of the take to the crown and pocketing the rest. Plaintiff lawyers have become the new tax farmers; their share of this booty will run into tens of billions of dollars
The settlement money was supposed to be spent on treating tobacco-related illnesses and on antismoking programs. Instead, two-thirds of the money has gone for political pork and for plugging budget gaps.