YELLOW PAD
By AJ Montesa
In 1994, the CEOs of seven major tobacco manufacturers testified before the United States Congress regarding the health impact of tobacco consumption.
Up to that point, there was still some doubt over whether cigarettes were truly directly harmful. Legislation had already been proposed to regulate the consumption of tobacco products, but the truly effective laws were being blocked by the well-financed tobacco lobby.
During the hearing, the industry continued to feign ignorance on the concern over public health. However, an overwhelming amount of scientific and medical evidence were building to support two conclusions: first, tobacco kills; and second, we need to do something about it.
The result of the hearing was the Master Settlement Agreement in 1998 — an accord between the US Government and the largest cigarette manufacturers which required the latter to settle billions of dollars’ worth in damages annually forever, as well as an imposition of restrictions and regulations on the sale and marketing of cigarettes.
It was a victory for the health sector and an acknowledgement of a crucial fact. Tobacco products are essentially delivery devices for nicotine and carcinogens. Those are the two things the industry is contributing to society: addiction and cancer. But a third ill might just be caused by the tobacco industry at large — conflict of interest leading to an erosion of democratic institutions.
Just last November, the House Committee on Ways and Means convened to discuss a proposal to raise the taxes on cigarettes and tobacco products. Sin taxes have been recognized by the Framework Convention on Tobacco Control, the first international treaty on health, as the single most effective policy tool to discourage consumption of tobacco.
While we’ve come to the point that the deadly impact of tobacco is no longer debated, the impetus has now become that of pushing an effective measure to mitigate a rising death toll.
During the hearing in November, doctors, experts, and officials from the Department of Health testified as to the toll that tobacco-related diseases cost our healthcare system. Economists and finance experts alike attested to the urgency and necessity of sin taxes. Not only are sin taxes significant towards decreasing consumption, our current circumstance also dictates these as necessary: the additional revenue will be crucial in funding the Universal Health Care program that recently passed in Congress and will soon be signed into law.
But to those in attendance during the hearing less than two months ago, it was an eerie reminder of the momentous hearing that took place over 24 years ago in the United States.
Despite the surmounting evidence presented by proponents, it was the presence of the tobacco lobby that seemed to speak the loudest.
Both scientific and economic arguments of the sin tax seemed to fall on deaf ears. Rep. Bolilia, for example, questioned whether many of the already-established tobacco-caused diseases were truly attributable to cigarette consumption. Paradoxically, she also supports anti-tobacco campaigns through graphic warnings.
Rep. Garin seemed to have been baffled by the supposed “tradeoff” between the health and revenue objectives of the measure. Sin taxes are first and foremost a health measure with the intention of preventing would-be smokers from developing the deadly addiction. The economics behind it as a revenue measure lies in the fact that cigarette consumption is own-price inelastic due to the product’s addictive nature. That is, an increase in price does not drastically reduce aggregate consumption; therefore, gains in revenue can be expected despite a reduction in consumption. But this fundamental economic logic went unheeded.
The standard industry arguments were even echoed by legislators like Cong. Bravo who kept bringing out the red herring of illicit trade (smuggling) as the main issue to be addressed. The rebuttal to this unwittingly came from industry player PMFTC itself: the corporation was able to raise prices by over 22% — more than the latest excise tax increase in TRAIN. They argued that they were able to do this in response to artificially low prices in the market — a sign of illicit trade. But the mere ability to raise prices while still remaining competitive indicates that most of the illicit trade problem is already being addressed.
Alarmingly these all seem to show that our legislators have an indifference towards clear evidence, and a deference instead toward the industry’s alternative facts.
We can’t be certain if these legislators were genuinely unaware, simply miseducated, or calculatingly disingenuous. But one thing is clear — we are the losers in this scenario. The results are half-hearted, watered down versions of sin taxes and tobacco regulations that do not meet the need for dramatic life-saving laws.
The industry probably thinks it can play democracy for a game and rig the rules. The saying goes, “The unlimited checkbook — that’s how Big Tobacco wins.” Despite all the lawsuits and proposed regulation, Big Tobacco uses its vast war chest of resources to arm itself with lawyers, to produce studies to support its alternative facts, and to finance the campaigns of politicians who would be willing to play the industry’s game.
Fortunately, there is hope in the Senate, and it rests squarely on the shoulders of Ways and Means Committee Chair Sonny Angara.
Senator Angara has a decision calculus of his own to consider. He may simply do nothing. While not directly supporting the industry’s stance, his inaction would be effectively playing into Big Tobacco’s ploy. Or he could see this for the public health issue that it is and be an advocate for saving the lives of hundreds of thousands of Filipinos for years to come. His next moves in the waning days of this session of Congress will determine whether our aspirations for a sustainable Universal Health Care system will be realized or not.
As the mid-term elections are just around the corner, our legislators have decisions to make — to choose complicity and cowardice, or to choose public health and the general welfare. Voters will likewise have the same choice to make.
AJ Montesa is an economist and a member of the Action for Economic Reforms’ fiscal policy team.