RJR, B&W fighting tobacco buyout

R.J. Reynolds Tobacco Co. and Brown and Williamson Tobacco USA are taking out ads in Washington, D.C., publications this week, hoping to sway the public and Congress. “How to Impose a Huge Tax, jeopardize jobs and cripple states’ budgets:” the ad reads in super-sized script.

In the advertisement, the companies say the tobacco buyout would impose the “largest tax increase since 1993 – $13 billion in new taxes.”

The money, the ad claims, would be paid to quota holders, 85 percent of whom aren’t tobacco farmers. It says those non-farmers will get 307 times more money per acre than the government pays support to other crops.

It says that passage of the tobacco buyout would jeopardize high-paying manufacturing jobs. It also says that broad regulation will bring FDA on the farm while giving “significant advantage to Philip Morris USA, the dominant cigarette manufacturer.”

In a late-August letter to the editor of a Winston-Salem newspaper, in response to an article about the buyout, Graham Boyd, executive vice president of the Tobacco Growers of North Carolina, wrote, “It is a shame that the only group in the country to verbally and actively oppose farmers and quota owners achieving a buyout is one of the major domestic customers.

Earlier, R.J. Reynolds said that Senate bill would require it to pay more in taxes than its projected operating profit this year.

Under the bill, R.J. Reynolds would be required to pay more than $570 million in taxes.

A spokeswoman called it “totally unpalatable” for the company.

Under the bill, cigarette makers would pay for 98 percent of the $13 billion buyout over a six-year period. The figure is based on the company’s market share. R.J. Reynolds is the second-largest cigarette maker in the nation. Over the six-year life of the bill, the company could pay out $3 billion.

Earnings forecast for 2003 are $470 million to $495 million. For the first year of the buyout alone, R.J. Reynolds says the buyout would take all the companies projected operating income, plus $75 million more.

Tommy Payne, R.J. Reynolds executive vice president, said the bill “demonstrates an absolute lack of understanding of the financial situation of the tobacco industry.

Reynolds, Brown & Williamson and Lorillard Tobacco Co. are also concerned that buyout legislation will be linked to FDA regulation of cigarettes.

Supporters of the Senate bill have said that it’s now or never for a tobacco buyout bill to pass. Just last week, tobacco-state House members agreed on one bill to pursue. A tobacco buyout could be an amendment to FDA regulation, which is anticipated later this month.

The core of the two bills would provide $8 per acre for quota owners and $4 for growers.

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