Issues Surrounding a National Tobacco Settlement

RCED-98-110: Published: Apr 15, 1998. Publicly Released: May 14, 1998.

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Robert A. Robinson
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Pursuant to a congressional request, GAO reviewed issues surrounding a proposed national tobacco settlement, focusing on: (1) tobacco-related industries and existing studies that assess the national and regional economic impacts of the tobacco industry; (2) smoking trends for United States and Canadian youths; (3) the potential effect of a settlement on state revenues from cigarette excise taxes; and (4) the extent to which interstate and international cigarette smuggling affects the United States.

GAO noted that: (1) according to recent studies, from 353,000 to 555,000 jobs are directly related to the tobacco industry nationwide, including jobs in the tobacco growing, warehousing, manufacturing, wholesaling, and retailing industries; (2) according to these studies, an additional 653,000 to over 2.3 million jobs nationwide are estimated to be indirectly related to the tobacco industry; (3) this additional employment includes jobs associated with the producers that supply materials and services to the tobacco industry and jobs associated with the industries that provide goods and services to the employees of the tobacco industry and its suppliers; (4) two of the studies estimated that declining tobacco consumption--that would occur, for example, as a result of an increase in the price of a pack of cigarettes--would likely result in job losses in the tobacco growing and manufacturing industries; (5) however, it must be recognized that the money previously spent on tobacco products would not simply disappear from the nation's economy; rather it would be reallocated to other goods and services; and (6) these studies indicate that this reallocation could have little effect on national employment, although the Southeast Tobacco Region could experience job losses.

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