magnitude has never been passed by Congress. The federal tobacco excise tax was increased by 15 cents (to be phased in) in the Balanced Budget Act of 1997, but this is far less than recommended and encountered stiff opposition. There are also concerns about any new taxes and about the regressive nature of taxes that fall on current tobacco users.
The settlement proposes that the tobacco industry make payments into a fund and stipulates certain broad principles for spending those funds, subject to allocation by a board. The industry payments are an alternative mechanism to a tax and would similarly raise prices. This process leaves many unanswered questions and relies on institutions that must be created de novo. Negotiation of the allocation process could well prove to be complicated, with many interested parties staking contending claims, because tobacco firms, tobacco farmers, health researchers, tobacco control activists, state governments, state and federal health programs, international tobacco control efforts, and others all have a stake.
The proposed settlement has the virtue of ensuring that some funds are used to promote public health, to advertise the health dangers of tobacco use, to carry out research, and to support other tobacco control measures. This link between tobacco revenues and tobacco control measures has been implemented in state efforts, such as those in Arizona, California, Massachusetts, and Oregon. This linkage mitigates the unpopularity of tax increases. The mixed uses of funds derived from tobacco revenues for health programs or education as well as tobacco control, however, has proven to be troublesome, particularly in the first years of the California program.12 Use of tobacco excise tax funds has also been contentious elsewhere, but a fraction of the funds from state excise taxes has successfully been devoted to tobacco control efforts in Arizona and Massachusetts. Tobacco tax collection has never been linked to tobacco control efforts at the federal level, and partially for this reason, federal tobacco control initiatives have been anemic. The State of California, for example, spends more on tobacco control than the entire federal government.13 Ensuring that some tobacco revenues go to tobacco control could be achieved by legislative set-asides in combination with tax increases, without the need to create a new mechanism for obtaining payments from industry or for the allocation of a new pool of funds. Regardless of whether existing processes are used to allocate funds or new ones are created, the process should be insulated to the degree possible from raw politics. Funds allocated for research, for example, would most fruitfully be directed through peer-reviewed channels at the National Institutes of Health (NIH). In program areas in which such peer-review mechanisms do not exist, they should be created.
Goals for reducing tobacco use among youths and adults are specified in Healthy People 2000,14 and the settlement proposes that the rate of smoking among youths be reduced by 60 percent over a decade. The proposed settlement incorporates some penalty payments if the rate of smoking among youths is not reduced, but the penalties are capped and there are provisions for rebates to be given to firms on the basis of good faith efforts. Price increases and other measures incorporated into the settlement would surely result in improvements to public health compared to the status quo, but they may fall short of achieving the specified goals.