In today's society I think we fight alot to try to make things better, healthier and move environmentally safe. I think our forefathers would be very proud of us. However, I think what has always happened over the history of this country and what continues to happen today is that when we make changes, whether for the good or the bad, we never think that it effects us financially.
Now I am not saying that things should not be taken away from our society that may cause heath issues or is bad for the society as a whole. I just want us to understand as we go through financial crisis and such that it isn't always about Wall Street and political greed.
For my example, I am going to bring up something that really over the last twenty years has impacted a great part of this country: smoking. Almost every state has some kind of law about smoking in public places and work places. Now I know the main reason for this was for the health of the non smokers more than the smokers but it has effected us all.
So to begin with let's look at some numbers. The cigarette business was worth 614 BILLION dollars in 2009 worldwide, the biggest of which was China. The nine cigarette companies also combined to generate 160 billion dollars in tax revenue. For the purpose of my writing, I am going to concentrate on Philip Morris since they are a US based company. In 2008, Philip Morris had revenues of 64 Billion dollars, which represented about 16% of the market share globally. If you take 16% of the tax revenue that comes out to roughly 25 billion dollars that Philip Morris would generate.
There is not alot of data on how much right now the smoking laws have decreased smoking and cigarette purchases. So let's say for ease that it has caused an overall decrease of 10%, which is not hard to say really since prices as well as the laws I am sure would cause 1 out of every 10 smokers to quit or decrease.
So here are some of the what can happen when you decrease smoking or cigarette purchases by 10%:
A. Phillip Morris loses 6.4 billion dollars in revenue.
1) They do not make their estimates for Wall Street, thus making them less attractive to stock investors which then makes people sell their stock and reduces the stock price.
a) This of course then reduces stock options that some employees may have and also people that might invest in them as part of their 401K investment.
b) It can cause the Dow as a whole to reduce because Phillip Morris doesn't make their estimates which then has an effect on the entire US economy.
2) They decide they can make up the revenue overseas where smoking has not become as conservative as it has in the US.
a) This of course is another case of where a US company now starts to invest more in overseas operations, thus causing less revenue streams to be coming into the US.
3) They decide that they have to reduce their costs at the same rate that their revenue has decreased.
a) This means more people are now unemployed.
1. Now there are more people on unemployment
2. Less consumer purchases are now being made
3. People could lose their house.
B. The company's that supply Phillip Morris with supplies such as the cigarette packages, the tobacco, etc will also have to reduce their revenue to PM or find other places to sell to.
C. What about businesses that have to put the smoking bans into place, bars are the ones that they feel are hit the hardest.
1) Now the bars not only have to ban smoking but to keep their regulars they have to build a place where their customers can go and still follow the ban rules.
a) Of course, each moment that the patrons are out smoking is less time they are purchasing alcohol which reduces their revenue even more.
2) If the bar decides that they do not want to build a smoking area, they will most likely lose at least 50% of their patrons which they will have to make up for.
a) Now maybe the bar will get new customers but bars are built to bring in regular patrons with new ones being a luxury. Bringing back 50% of new customers is a tall order.
D. Let's talk about tax revenue since most of the price of cigarettes now is taxes.
1) This means that programs that depend on this revenue have to find the the revenue somewhere else or the program will be underfunded or worse can close down.
a) Of course, people again can lose their job.
b) Politicians depend on some of these programs to get elected.
c) It could mean that they tax something else that citizen's do not want taxed
d) It could mean that they will tax the citizen's directly to make up the difference.
E. So since we are talking about health improvement, we cannot disregard the health care part of this conversation. So let's say that now people, smokers and others, are now more healthy.
1) Obviously health care costs are reduced but do we think insurance companies are going to reduce our rates?
2) Of course doctors may have time to attend other patients that are needed but at the same time they may lose more revenue which means they may have to close up shop.
3) What about living longer? They may add slightly more to the social security pot but if they live longer they are most likely going to take more out of the pot and leave less for future generations.
So in the end, the 6.4 billion dollar decrease may actually be a bargain compared to what the real amount would be once you take everything into consideration. Now I am not saying that we should stop trying to stop smoking from happening and people should not live longer. All I am doing is showing a different aspect of the financial troubles in this country.
Maybe this is an extreme example but don't underestimate the effect of changing over from McDonald's to a healthier food source. Some of us may never see this underbelly unless our favorite bar closes down or a friend is laid off from work. We should always try to do what is best when we see something is bad for the country and it's citizens, but we need to understand that it always comes with a price. A price that eventually needs to be repaid.
http://www.tobacco-facts.net/2010/11/global-tobacco-industry-cigarette-cost
http://www.ehow.com/list_6791046_benefits-smoking-being-banned_.html
Now I am not saying that things should not be taken away from our society that may cause heath issues or is bad for the society as a whole. I just want us to understand as we go through financial crisis and such that it isn't always about Wall Street and political greed.
For my example, I am going to bring up something that really over the last twenty years has impacted a great part of this country: smoking. Almost every state has some kind of law about smoking in public places and work places. Now I know the main reason for this was for the health of the non smokers more than the smokers but it has effected us all.
So to begin with let's look at some numbers. The cigarette business was worth 614 BILLION dollars in 2009 worldwide, the biggest of which was China. The nine cigarette companies also combined to generate 160 billion dollars in tax revenue. For the purpose of my writing, I am going to concentrate on Philip Morris since they are a US based company. In 2008, Philip Morris had revenues of 64 Billion dollars, which represented about 16% of the market share globally. If you take 16% of the tax revenue that comes out to roughly 25 billion dollars that Philip Morris would generate.
There is not alot of data on how much right now the smoking laws have decreased smoking and cigarette purchases. So let's say for ease that it has caused an overall decrease of 10%, which is not hard to say really since prices as well as the laws I am sure would cause 1 out of every 10 smokers to quit or decrease.
So here are some of the what can happen when you decrease smoking or cigarette purchases by 10%:
A. Phillip Morris loses 6.4 billion dollars in revenue.
1) They do not make their estimates for Wall Street, thus making them less attractive to stock investors which then makes people sell their stock and reduces the stock price.
a) This of course then reduces stock options that some employees may have and also people that might invest in them as part of their 401K investment.
b) It can cause the Dow as a whole to reduce because Phillip Morris doesn't make their estimates which then has an effect on the entire US economy.
2) They decide they can make up the revenue overseas where smoking has not become as conservative as it has in the US.
a) This of course is another case of where a US company now starts to invest more in overseas operations, thus causing less revenue streams to be coming into the US.
3) They decide that they have to reduce their costs at the same rate that their revenue has decreased.
a) This means more people are now unemployed.
1. Now there are more people on unemployment
2. Less consumer purchases are now being made
3. People could lose their house.
B. The company's that supply Phillip Morris with supplies such as the cigarette packages, the tobacco, etc will also have to reduce their revenue to PM or find other places to sell to.
C. What about businesses that have to put the smoking bans into place, bars are the ones that they feel are hit the hardest.
1) Now the bars not only have to ban smoking but to keep their regulars they have to build a place where their customers can go and still follow the ban rules.
a) Of course, each moment that the patrons are out smoking is less time they are purchasing alcohol which reduces their revenue even more.
2) If the bar decides that they do not want to build a smoking area, they will most likely lose at least 50% of their patrons which they will have to make up for.
a) Now maybe the bar will get new customers but bars are built to bring in regular patrons with new ones being a luxury. Bringing back 50% of new customers is a tall order.
D. Let's talk about tax revenue since most of the price of cigarettes now is taxes.
1) This means that programs that depend on this revenue have to find the the revenue somewhere else or the program will be underfunded or worse can close down.
a) Of course, people again can lose their job.
b) Politicians depend on some of these programs to get elected.
c) It could mean that they tax something else that citizen's do not want taxed
d) It could mean that they will tax the citizen's directly to make up the difference.
E. So since we are talking about health improvement, we cannot disregard the health care part of this conversation. So let's say that now people, smokers and others, are now more healthy.
1) Obviously health care costs are reduced but do we think insurance companies are going to reduce our rates?
2) Of course doctors may have time to attend other patients that are needed but at the same time they may lose more revenue which means they may have to close up shop.
3) What about living longer? They may add slightly more to the social security pot but if they live longer they are most likely going to take more out of the pot and leave less for future generations.
So in the end, the 6.4 billion dollar decrease may actually be a bargain compared to what the real amount would be once you take everything into consideration. Now I am not saying that we should stop trying to stop smoking from happening and people should not live longer. All I am doing is showing a different aspect of the financial troubles in this country.
Maybe this is an extreme example but don't underestimate the effect of changing over from McDonald's to a healthier food source. Some of us may never see this underbelly unless our favorite bar closes down or a friend is laid off from work. We should always try to do what is best when we see something is bad for the country and it's citizens, but we need to understand that it always comes with a price. A price that eventually needs to be repaid.
http://www.tobacco-facts.net/2010/11/global-tobacco-industry-cigarette-cost
http://www.ehow.com/list_6791046_benefits-smoking-being-banned_.html
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