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• VISCUSI: Smoked out: In the end, the massive 1998 civil settlement penalized those who light up, not the offending tobacco firms 

But smokers, not tobacco companies, on several levels bear the brunt of the deal, which established penalties equivalent to an additional tax on cigarettes. In most years this tax will be about 40 cents. Whether the states get paid off at all hinges on whether people continue to smoke and how much. . .

The three leading tobacco-producing states all were losers. Kentucky accounts for 2.8 percent of the medical costs, but got only 1.8 percent of the settlement. North Carolina accounts for 3.5 percent of cigarette-related medical costs, but received only 2.4 percent. Virginia, which bears 2.8 percent of the medical costs, received only 2.1 percent.

The attorney general most responsible for brokering the deal was Christine Gregoire of Washington state. Her state, which accounts for 1.5 percent of the medical costs, received 2.1 percent of the settlement. In fairness, perhaps the state should have gotten a bonus given Gregoire's central role in brokering the deal. But did the other state attorneys general realize that compensation to Washington for Gregoire's coordination efforts increased the state's piece of the action from $3.1 billion to $4.3 billion? . .

But let's look at the logic. The existence of economic costs is not a sufficient basis for giving the states a valid claim. Cars are also dangerous . . .

The basic elements of the financial accounting added to the improbable prospects of the litigation. To be sure, smokers do incur higher medical costs - about five cents per pack in Massachusetts in the mid-1990s. Yet, because smokers have a shorter life expectancy than nonsmokers, smokers incur a cost of 11 cents per pack less in nursing home costs and nine cents per pack less in pension costs. . .

The settlement established a new tax on cigarettes without going through the usual legislative procedures that enable all segments of society to have political input. And the agreement included numerous regulatory provisions, such as restrictions on cigarette advertising. None of these policies underwent the usual scrutiny accorded governmental regulations.

Rather than settle the litigation, both sides should have pursued the case to its legal resolution. Doing so would have taken tax and regulatory policy out of the legal arena and established guidelines for similar litigation against other controversial products, ranging from guns to lead paint.

While most states remain enthusiastic about the incoming tobacco revenues, higher cigarette taxes, such as those being considered now by legislatures in Massachusetts and elsewhere, could have achieved the same effect without sidestepping conventional political processes.

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