Senate OKs tobacco regulation, quotas

$12 billion measure linked to tax bill on EU duties

July 16, 2004|By COX NEWS SERVICE

WASHINGTON - The Senate voted 78-15 last night to give the government broader power to regulate cigarettes and create an industry-financed buyout of tobacco "quotas" that have propped up prices since the 1930s.

The vote on the $12 billion tobacco buyout added language to a corporate tax bill needed to end escalating European duties on several U.S. products.

Whether it will become law remains in doubt, because little time remains in this legislative year for a House-Senate conference committee to resolve disagreements about the tobacco measure.

The tobacco deal was struck when tobacco-state members who favored only the $12 billion buyout for those who own or use tobacco quotas teamed up with others who favored regulation of tobacco by the Food and Drug Administration. Neither proposal had enough support to pass on its own.

The tobacco buyout crafted by Sen. Mitch McConnell, a Kentucky Republican, was merged with a tobacco regulation bill sought by Ohio Republican Sen. Mike DeWine and Sen. Edward M. Kennedy, the Massachusetts Democrat.

Kennedy described the combination as "a shotgun marriage," and DeWine called it "a marriage of convenience ... that will last through the conference committee."

As part of the deal, Senate Democrats stopped blocking attempts by the Republican majority to appoint senators to the conference committee that will work to bridge differences between the $170 billion Senate tax bill and the $150 billion House tax bill.

A wide array of businesses had been begging Congress to finish work on the bill during the 24 work days left before its adjournment target of Oct. 1. Both versions contain hundreds of tax breaks tailored to help selected companies, and both would eliminate existing tax policies that have been ruled illegal by the World Trade Organization and which have sparked the European retaliatory tariffs. Those tariffs are rising by one percentage point a month.

"Today's Senate action will definitely help, because it's one more procedural hurdle overcome," said Kimberly Pinter, director of corporate finance and tax for the National Association of Manufacturers.

The House version contains a smaller tobacco buyout of $9.6 billion. Just this week, the House scrapped its original plan to finance the buyout with taxpayers' money. Instead, the House ordered its negotiators to insist that any buyout be privately financed.

Some buyout supporters found it hard to swallow the new regulatory powers for the FDA.

Under the Senate bill, the agency could restrict nicotine levels in tobacco products, order the removal of certain ingredients or require cigarette makers to disclose more ingredients. The FDA could not ban cigarettes.

Some opponents of farm subsidies had misgivings about the buyout.

"We find that 85 percent of the benefits go to nonfarmers" who inherited or bought quotas and lease them to today's farmers, complained Sen. Don Nickles, Republican of Oklahoma, who said he will try to kill the buyout in the conference committee.

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