Ban Cigarettes? Not When the Economy Depends Upon Them

by: Charles Payne

There are a lot of ugly truths out there that don't need conspiracy-spinning or an ideological bent. The World Health Organization released a report saying smoking will kill 8 million people a year by 2030. This is a shocking number, and yet it feels like governments may not be at all unhappy. I'm not an advocate for government intervening to outlaw smoking as much as I hate cigarette smoke (I like cigars and pipes, however); I just think governments are fine with the number. The United Nations reports there will be 1 billion deaths from smoking in the 21st century, up from 1 million in the 20th century. I suspect a giant chunk of these deaths will occur in China, which has seen millions die from wars, natural disasters, and famine.

In fact, the Great Leap Forward engineered by Mao from spring 1959 to 1961 saw 30.0 million starve to death and another 2.5 million beaten and tortured to death.

So in addition to population control, why haven't cigarettes ever been given the alcohol or drug treatment? Money! In a report from UBS entitled "10 reasons to stay bullish on tobacco," the firm pointed out how powerful cigarettes are for the retail sector. Apparently a Marlboro buyer makes an average of 10 trips per month to gas stations or convenience stores, spending $17 each trip, according to Altria (NYSE:MO). A lot of businesses, including the government, ring the register when people drop in to pick up a pack of cigarettes.

  • 82% of these consumers buy beverages
  • 63% buy food
  • 56% buy gas
  • 36% buy lottery tickets

This makes cigarettes a powerful centerpiece to these retailers. Couple this with the size of the market, which is now $661.0 billion worldwide for tobacco, of which cigarettes are 91%. With all the food police running around Capitol Hill and this administration, there must be an irresistible urge to ban cigarettes, but of all the other actions, including the war on banks (after bailing them out), such action would crush the aforementioned retailers, food and beverage companies, and states. In addition to the lottery scam, states make a ton of money from taxing cigarettes. The average state tax on a pack of cigarettes is $1.45; in tobacco states $0.485, in non-tobacco states $1.57. For your state tax rate on cigarettes, see here.

And don't forget Uncle Sam's 18.2% tax on that pack of cigarettes. (By the way, the federal government through taxes and fees, hits you up as much as 5% for beer, 10% for a gun, and 20% on your airline tickets.)

The fact of the matter is that 8 million deaths a year is simply the cost of doing business … and as they say, "Business is good."