Cigarette tax may rise
Cigarette tax may rise
A presidential commission officially unveiled Monday its proposal to raise the federal cigarette tax to buy out government quota owners and help farmers, but there were signs that a tax increase might not fare too well with the Bush administration or Cong
The commission released a 54-page report that called for raising the federal tax on cigarettes by 17 cents a pack to provide funds for the buyout and that asked Congress to empower the Food and Drug Administration to regulate the manufacture, distribution and marketing of cigarettes.
The White House had little to say publicly about the report Monday, while key legislators from tobacco states and the nation's No. 2 cigarette manufacturer, R.J. Reynolds Tobacco Co., said they would oppose the proposed cigarette tax.
"We will review the report's recommendations very carefully," said White House spokeswoman Jeanie Mamo. But Mamo added that any new regulatory scheme for tobacco products would need broad support from Congress to move forward.
U.S. Sens. Jesse Helms, a Republican, and John Edwards, a Democrat, as well as U.S. Rep. Bob Etheridge, a Democrat, said they would oppose a 17-cent increase in the cigarette tax.
"I am troubled by the notion that a proposed annual $3.4 billion increase in the tobacco excise tax will compound already existing problems for everybody involved," Helms said in the statement.
The commission was put together by President Clinton in September to figure out ways to help tobacco farmers and their communities while protecting public health. Among the commission's recommendations, made public on Monday in the nation's two largest tobacco states -- North Carolina and Kentucky -- were proposals that would:
Replace the current government quota system for tobacco with production permits. Unlike quotas, which are tied to a specific piece of land and can be sold or rented, the production permits would be issued each year and would be non-negotiable. Quotas are required to sell tobacco within the federal government price support system for tobacco. The vast majority of quota owners don't grow tobacco, instead leasing their allotments to active farmers. There are more than 90,000 quota owners in North Carolina, but about 11,000 tobacco growers.
Pay quota owners who decide to get out of tobacco production $8 a pound to retire their allotments. Active tobacco growers -- including those who do not own but only lease quotas -- would receive $4 for every pound of tobacco they agree to permanently stop growing. Those continuing to grow would receive $2 a pound.
Establish a Center for Tobacco-Dependent Communities to provide assistance to areas in transition from a tobacco-based economy. The center would receive $5 million annually for five years.
Use money from the proposed cigarette tax to fund smoking cessation programs that would be included in basic Medicaid and Medicare coverage.
If the quota buyout plan is approved, the average annual payment to quota holders in North Carolina would be $11,400 for five years, more than twice the national average of $5,400, the commission estimated.
The panel said growers in North Carolina would receive an average annual payment of $32,900 for five years, more than three times the national average of $10,500.
The commission estimated the overall cost of the buyout at about $16 billion over five years, if three-quarters of tobacco farmers stop growing the crop.
Tobacco farmers and quota owners support the plan, but most believe it will be a tough sell in Washington.
"There is nothing not to like in this if you are a grower or a quota owner," said Larry Wooten, executive director of the N.C. Farm Bureau in Raleigh. "The big question is how much support there will be for this plan outside the tobacco community."
Staff writer Bob Williams can be reached at 829-4656 or email@example.com