Tobacco.org

LEHMANN: The Great Tobacco Bond Scam  

The latest iteration of the municipal tobacco bond issuance is a $5.5 billion issue by the state of Ohio. In all, some $16 billion of such bonds are being issued this year alone. The category deserves the appellation "scam" because the chances that investors will ever see their money again are slim. . . .

There is nothing conceptually wrong with the states issuing these tobacco bonds if it were done on an honest basis. For example, have the bonds provide assurances that the state would replace the revenue stream provided by the MSA with an increase in the state cigarette tax should the agreement unravel. Since this would only replace one tax with another, the price of cigarettes could stay the same.

But then, why make such a promise? The upper limit of cigarette tax rates has not yet been found, nor have we reached a limit of sucker investors.

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