Funding tobacco supports may shift to the `user'
Raleigh, N.C. — Jim Oliver was beaming during a recent interview -- rather like a man who's been shot at and missed. ``I slept better last night than I've slept in a long time,'' the North Carolina state Grangemaster said. It looks as though the cigarette excise tax will remain at 16 cents a pack, and not roll back to 8 cents, as was originally planned when the tax was increased three years ago.
But what had Mr. Oliver all smiles was a vote by the House Ways and Means Committee to earmark for the tobacco price-support program for five years 1 cent of the excise tax on each pack of cigarettes sold.
The vote must still be followed by approval by the full House in September, and corresponding action by the Senate. But if the measure passes, it would mean a shift from financing the tobacco program out of general revenues to financing it out of, in effect, a ``user fee.''
Even the Coalition on Smoking or Health ``did not oppose'' the measure, says staff director Matthew Myers, noting carefully that this is not the same thing as supporting it. But he does give Rep. Charlie Rose (D) of North Carolina, author of the bill, credit for a creative solution to a politically sticky question -- a solution that helps the farmers, and not the cigarettemakers.
Meanwhile, tobacco farmers in the Tarheel State are quick to point out that since 1982, at least, the tobacco support program has been run on the basis of ``no net cost'' to the government. Instead, tobacco farmers pay an ``assessment'' per pound of tobacco they are allowed to grow under the quota program. The assessment started at 3 cents a pound but is now up to 25 cents a pound for flue-cured or bright leaf tobacco and 30 cents per pound for burley tobacco.
The earmarked excise tax funds will replace some of that assessment.
``It will mean a tremendous relief to the farmers,'' Oliver said.
North Carolina State University economist William D. Toussaint estimates that that 1 cent of excise tax will be equivalent to about 19 cents of assessment to the farmers. But Dr. Toussaint also calculates that despite the ``no net cost'' provision -- a political compromise scribbled out in longhand during debate on the floor of Congress -- it will still cost the federal Treasury some $600 million at a bare minimum, and likely up to $1.2 billion, to clear up the overhang of tobacco in effect bought up by
the government from crop years before ``no net cost'' went into effect.
The Rose measure, if it becomes law, will presumably take some of the political pressure off the tobacco program and ease the way for some other reforms sorely needed. Representative Rose is expected to start putting together some reform legislation after Labor Day.
There have already been some major changes recently, and some more are in the pipeline.
In times past, farmers were granted an ``allotment'' of so many acres on which they could grow a certain quota of tobacco, expressed in pounds. Farmers could grow this tobacco themselves on their own land, could arrange for someone else to grow on their land (sharecroppers, in effect), or they could lease their quota to someone to grow on other land within the same county as the land to which the leased allotment was tied.
Under the system, allotments were locked onto the land that had historically produced tobacco; over time many allotments ended up in the hands of the proverbial ``old ladies in tennis shoes,'' the widows of farmers, and of other nonfarming property owners, such as local airport authorities that condemned farmland to build runways. It typically costs a farmer who must ``rent quota'' about 50 cents a pound to do so; tobacco has been selling, meanwhile, for about $1.70 to $1.80 a pound.
Since 1982 it has been legal to sell allotments separately from the property to which they are attached; corporations, moreover, were required to sell theirs.
After 1986, ``lease transfer'' will no longer be allowed, under legislation passed a few years ago. Allotment owners who do not grow tobacco on their own land -- either themselves or by tenants -- will have to sell or forfeit their allotments. The expected result is lower production costs -- one farmer predicts a ``fire sale'' of allotments -- and a more sensible system.