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Thursday, September 4, 2014

Profiting off "Health" and Vice

Yesterday we read that CVS Pharmacy known as 'CVS Trademark' is now going to call themselves 'CVS Health' and more interestingly will no longer be selling tobacco products..

We thought this was humorous..

They say its to promote better overall well-being and they couldn't in good conscience sell a product that causes physical harm to people..

And this was expressed with a straight face while ignoring the fact they will still sell chocolate bars, cheese puffs, sugary soda, and in most states, beer and wine
So what's the deal?  Is CVS truly health conscious?

Maybe.. who knows..  Doubt it..

We believe they are more cost conscious as in a pack of cigarettes now only brings in a 6% profit to vendors after initial wholesale cost and all myriad of government taxes dumped on the product..

And even though people still smoke and probably will till the End of Days, they're not smoking as much..
 In 1990, smokers made up 25.5% of the adult population; by 2010, prevalence had declined to 19.3%. ..  Then add all the restaurants, bars, etc who do not allow smoking and the habit has gotten to be a social hassle for many..

Thus you have CVS holding onto more cigarettes at their thousands of locations at higher and higher prices which means more inventory, with smaller profit margin and less turn over of product and waste of expenditure

So we guess sure CVS is health conscious..  Their fiscal health.

Of course who ends up suffering from these type of actions?
We the people..

As horrible and addictive and cancerous cigarettes are, smokers pay those exorbitant 'sin' sales taxes that otherwise everyday people would have to pay..

When a pack a cigarettes is purchased, generally about 38% or so goes to the actual product with the tobacco farmers actually making less than 1% per pack sold.

The other 60% or so is Federal, State and local taxes with State taxes the biggest chunk at usually 33%.

So let's do some simple math here..
Lets say you have a state with 5 million adults and of that number, 20% are smokers which is obviously 1 million.

And to keep everything exaggeratedly simple, every individual who does smoke goes through a carton a week (10 packs).. no more.. no less..

And we're going to guess-timate that a carton costs $50..  We don't smoke so that number could be super high or super low, but just stay with us..

**  1 million people x $50/carton = $50 million in one week
33% of $50 million =  $16.5 million in weekly state taxes

$16.5mil. x 52 weeks =  $858 million

So in other words, if every business in a specific state did what CVS is doing or magically every person stopped smoking, just based on this very simple example, a State would be denied $858 million in tax revenue which it would otherwise have to get elsewhere..

Property taxes perhaps?
Why not?

For instance in Atlantic City, three casinos have or are about to close for good and the revenue drop will be so dramatic i.e. the taxes city government can no longer collect, that residents there may see their property taxes next year jump by as much as 30% to cover the losses..

So while we logically assume smokers who used to go to CVS will simply go elsewhere to purchase their hourly nicotine fix, we wanted to show the math if CVS's strategy ever caught on with other businesses.

That's how it works folks-- Sin keeps economies going..
Whether it be gambling and prostitution in Nevada or betting the horses, greyhounds or Jai Alai in Florida or cigarettes, alcohol and lottery nationally..

That's how these states get their revenue which otherwise the 'decent' people would have to pick up the tab for..

In fact, we will make a prediction and just keep this in the back of your minds for when it does happen..

We predict if there is a major stock market crash and the Fed can not magically and artificially fix everything, thus we're in a genuine Depression, expect to see prostitution legalization expand beyond Nevada within 5 years of the event...
Think about it..  You don't think Washington state and Colorado legalized marijuana because the politicians wanted to appear cool to their doper constituents do you?

No.. it was out of economic necessity.

For instance Colorado expected to generate over $33 million in tax revenue within the first six months of legalization..

Of course most glazed druggies prefer buying illegal black market pot to state sanctioned due to those very same taxes and fees which were the motivation for legalization in the first place..

So according to Forbes, Colorado has lost an estimated $22 million in taxes vs what it projected because it is taxes 27% more than the guy or gal selling it on the corner..
And if Colorado keeps losing money, guess what?

Bye Bye Legal Marijuana...  The profit from incarcertion will once again take precedence..

Its all a business and there is little to nothing moral or ethical about a government..  If it can make money off a sin or deviance and those who write the biggest campaign checks are OK, then it will be legal..

Otherwise it won't..

By the way, ever wonder why Prohibition was repealed in 1933 instead of say 1928 or 1942?

Two words --  Great Depression..   More specifically, Year 4 of..
Government only cares about your health because they don't want to pay to keep you alive and businesses only care if the perception increases store foot traffic and ultimately sales..

That is why it doesn't matter if you base your personal morals and ethics on your upbringing, your Faith or simply on your own, Never Ever base 'right' vs 'wrong' behaviors or life choices by what a government determines is acceptable..

And especially so a corporate business.