Tobacco has been a mainstay of the American economy since colonial times and was even used as currency in trade with Native Americans. Slavery provided the means for plantation owners to profit from the cultivation of tobacco. By 1883 federal tobacco excise taxes accounted for one third of domestic revenue collected by the United States government. In 1921 Iowa passed the first state excise tax on tobacco. All states followed suit and became dependent on this revenue source. So did politicians, who were reluctant to bite the hand of the tobacco industry that fed them lucrative campaign contributions.
As grassroots efforts to restrict smoking in public places to protect non-smokers caught on in the 1970s and 1980s, Surgeon General C. Everett Koop used his bully pulpit to make the tobacco industry public health enemy number one. By the mid-1990s state attorneys general (AGs) in Mississippi, Florida, Texas, and Minnesota were emboldened to sue the tobacco industry to recoup the costs paid by the states to care for sick smokers. Editorial cartoonists were quick to note the hypocrisy of the AGs’ indignation toward the tobacco industry after the states’ decades-long dependence on cigarette tax revenue. Smoking-related illness now costs the US economy $300 billion a year (or an estimated 11.7% of all U.S. personal healthcare), dwarfing the $19 billion in local and state cigarette tax revenue (out of $3.42 trillion in total government revenue).