Legacy Costs: What the Cigarette Industry Owes—and Whether It Can Pay
The cigarette industry faces enormous legacy costs: MSA payments, litigation settlements, healthcare costs. As cigarette volumes decline, the revenue to pay these costs declines too. The legacy-cost time bomb is ticking.
The MSA payments—$200 billion over 25 years—are tied to cigarette sales volumes. As volumes decline, payments decline. The states that depend on MSA revenue are facing a fiscal cliff. The companies that owe the payments are facing declining revenue to pay them. **The legacy costs of the cigarette industry—litigation settlements, MSA payments, healthcare externalities—are enormous and growing. They are also tied to a revenue stream (cigarette sales) that is shrinking. The legacy-cost time bomb will detonate in the next decade.**
