No Taxation Through Litigation

Written by: Peter J. Ferrara

In his State of the Union Address in January, 1999, President Clinton announced that the Justice Dept. is preparing a litigation plan to take the tobacco companies to court. Clinton had ordered the Justice Dept. to sue cigarette manufacturers to recover the alleged costs paid by Medicare to treat smoking related illnesses.

This follows a previous joint suit by the states against these companies to recover the alleged smoking related costs of Medicaid.
That settlement effectively imposed a tax increase on smokers of $250 billion over the 25 year period, or about 45 cents a pack, as the cigarette prices paid by smokers are the only source of funds to finance these settlement payments. In effect, the cigarette prices paid by consumers will be $250 billion higher overall during the next 25 years, due to this settlement.

These suits are primary examples of a dangerous new trend. As the strong opposition of voters to higher taxes has generally stopped overt, legislated tax increases in Congress and state legislatures, the forces of Big Government are turning to other, more hidden means of raising taxes. Perhaps the most dangerous of these is taxation through litigation.

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