House to offer tobacco farmer buyout

Friday, June 4th 2004, 11:13 am

By: News On 6

WASHINGTON (AP) _ 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 Depression-era federal program that propped up prices through quotas.

Rep. Ron Lewis, R-Ky., 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.

Lewis said Friday 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 the European Union has imposed on U.S. exports as a result of the World Trade Organization's ruling that current U.S. corporate tax law illegally subsidizes the sales of American goods abroad.

The legislative package was put together by Rep. Bill Thomas, R-Calif., 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.

Thomas' office said he planned to introduce the bill later Friday.

Lewis said the committee would put the final touches on the bill next week and that Republican leaders planned to bring to the House for a vote the following week.

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 due to 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, so that White House condition has not been met.

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 Bush. ``We were very disappointed that he made that statement.''

Democratic presidential hopeful Sen. John Kerry, D-Mass., 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.

Rep. Richard Burr, R-N.C., said in an interview that administration officials recently ``communicated very clearly'' a willingness to consider signing a tobacco buyout bill if it satisfies several conditions.

Burr, who is locked in a competitive race for the Senate, said the White House wanted a requirement that the buyout mark the end of the program and wanted the cost limited and offset so the plan does not worsen federal deficits.

The administration, Burr said, does not want the measure to give the Food and Drug Administration the power to regulate the tobacco industry. Another source close to the negotiations said the White House was cool to the idea of FDA regulation but did not condition its support for a buyout on whether FDA was attached to it.

The issue is politically sensitive in tobacco-growing states such as the Carolinas, Virginia, Kentucky and Tennessee.

Bush is favored to carry the states where tobacco is grown in November, but Republican-leaning tobacco growers have warned GOP leaders not to take farmers votes' for granted, said Lamar DeLoach, president of the Tobacco Growers Association of Georgia.

The tobacco companies generally support a buyout, which would lower the price of U.S. tobacco, as long as they don't have to pay for it. The only company that has said it would help pay for a buyout, which was previously introduced in the Senate, was Philip Morris USA.

The Senate already has passed its version of the larger tax bill, which did not include a buyout.

Senators also have said that a buyout must be linked to a bill giving the FDA authority over cigarettes. A spokesman for Sen. Edward Kennedy, R-Mass., a chief sponsor of FDA regulation, said the inclusion of a buyout in the tax bill was problematic.

``This could complicate passage of the tax bill,'' said Jim Manley, the Kennedy spokesman. ``There's a great many people that will oppose the buyout without a link to the bill designed to give the FDA authority to regulate tobacco products.''