- The Washington Times - Friday, June 4, 2004

ASSOCIATED PRESS

House Republicans have agreed on a proposal that would provide tobacco growers with a buyout of nearly $10 billion in exchange for farmers giving up a Great Depression-era federal program that propped up prices through quotas.

Rep. Ron Lewis, Kentucky Republican, said the payout to farmers would take place over five years, with the $9.6 billion cost covered by a portion of the 39-cent federal tax on each pack of cigarettes.

Mr. Lewis said the White House was “very much involved yesterday in the final product.”

The measure is part of a wide-ranging bill to restructure corporate-tax breaks in response to tariffs that the European Union has imposed on U.S. exports as a result of the World Trade Organization’s ruling that U.S. corporate-tax law illegally subsidizes the sales of American goods abroad.

The legislation also would let taxpayers decide whether to deduct their state income or sales taxes from their federal income tax, according to a memo describing the bill obtained by the Associated Press. The provision would last two years and is designed to attract votes from lawmakers from states without income taxes and would cost $3.6 billion.

The legislative package was put together by Rep. Bill Thomas, California Republican and chairman of the tax-writing House Ways and Means Committee, after the Senate passed a restructuring and expansion of corporate-tax breaks last month. The Senate bill, however, does not include the tobacco measure.

Mr. Thomas’ office said he expected to introduce the bill yesterday.

Under a buyout, growers would be paid to give up government-granted tobacco allotments that establish how much leaf they are allowed to sell each year. Their livelihood has suffered in recent years because of a decrease in smoking and an increase in imports of cheaper tobacco.

Responding to a political outcry this election year, the Bush administration has signaled a willingness to go along with the buyout, provided it doesn’t increase the deficit. Money collected through the cigarette tax goes to the Treasury for general purposes, but House tax-law writers say the cost of the buyout will be offset by extending customs fees that are set to expire.

The administration’s willingness to consider a buyout marks a switch from just a month ago, when President Bush said on the campaign trail in Ohio that he didn’t think the system under which farmers grow and sell tobacco needed to be changed.

“He got a lot of heat,” Kentucky Farm Bureau President Sam Moore said of Mr. Bush. “We were very disappointed that he made that statement.”

Democratic presidential hopeful Sen. John Kerry of Massachusetts quickly reminded voters that he supported a tobacco farmer buyout when it was briefly considered in 1998.

The White House did not respond to several requests for comment on the legislation.

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