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Tobacco Farmers – Industry Position
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Tobacco Farmers – Industry Position
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Tom Freedman's Files
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P.O. Box 67
J. PHIL CARLTON, ESQUIRE
§
CARLTON
PINETOPS, NORTH CAROLINA 27864
email: [email protected]
LAWFIRM
www.sclfg.com
UNITED FEDERAL BANK BUILDING
108 N. 3RD STREET
PINETOPS, NORTH CAROLINA 27864
(919) 827-5141
FACSIMILE (919) 827-5487
February 5, 1998
VIA HAND-DELIVERY
Mr. Bruce N. Reed
Assistant to the President for Domestic Policy
Executive Office of the President
The White House
2nd Floor, West Wing
1600 Pennsylvania Avenue, N.W.
Washington, D.C. 20500
Dear Mr. Reed:
As you know, I represent Philip Morris Companies Inc., R.J. Reynolds Tobacco
Company, Brown & Williamson Tobacco Corporation and Lorillard Tobacco Company.
In response to a request made to Andy Schindler, CEO of R.J. Reynolds Tobacco
Company, the cigarette companies named above are sending to interested members of Congress
the enclosed example of one way in which the legitimate and important concerns of growers may
be addressed in the context of legislation implementing the terms of the June 20 Proposed
Resolution. The attached example will, I believe, offset any adverse economic impact to both
quota owners and tobacco growers that may result from implementation of the Proposed
Resolution.
The companies emphasize that this is not a specific industry proposal - it is simply one
sensible way to resolve these issues. The industry remains committed to working with growers,
members of Congress and the Administration to identify grower concerns and to discuss how
those concerns should be accommodated.
As always, we would be happy to meet with you to discuss this or any other issue.
With kindest regards.
Sincerely,
J. Phil Carlton
Enclosure
DISCUSSION DRAFT
DATE: 2/5/98
Principles:
A)
Economic Development Payments: Provide resources to tobacco-growing
communities to help them adjust to the economic impact any legislation
incorporating the terms of the June 20 Proposed Resolution may cause.
For the first 10 years after the Proposed Resolution is enacted into national legislation,
economic assistance would be provided to tobacco-dependent communities in an amount
equal to 2% of the industry's total annual payments contemplated by the Proposed
Resolution.
Eligible states would receive block grants to (1) establish a tobacco worker transition
program to assist workers displaced from tobacco warehousing, processing, and
manufacturing operations; and (2) carry out non-tobacco economic development
initiatives in tobacco-dependent communities.
Recipient states would determine the areas within their borders most in need of economic
assistance and the form of assistance that will be provided.
B)
Tobacco Program Operating Costs: Operate the program at no net cost to the
taxpayers.
The tobacco companies would assume all administrative costs of the program, crop
insurance, and extension service fees relating to tobacco. The companies would continue
to pay their share of the assessment for the no-net-cost fund and the tobacco marketing
assessment, as required under existing law.
Tobacco farmers would continue to pay their share of the assessment for the no-net-cost
fund and their share of the tobacco marketing assessment, as required under existing law.
C)
Deficiency Payments: Protect tobacco quota owners and tobacco growers from
economic loss resulting from reduced demand and consumption of tobacco
products.
For a period of 25 years after the Proposed Resolution is enacted into national legislation,
payments would be made to tobacco growers to compensate for lost income resulting
from a decline in the "base quota."
1
DISCUSSION DRAFT
DATE: 2/5/98
For each year in which the quota declines from the "base quota," payments would equal:
[(base quota) - (current year quota)] X (average net profit/lb.)
During the first 5 years after enactment of the Proposed Resolution, "base quota" would
be calculated by averaging the quotas for the 1996 through 1998 marketing years.
Every five years after enactment of the Proposed Resolution, excess quota would be
bought out from quota owners at $8/lb. and the "base quota" from which income
deficiency payments are calculated would be readjusted and reduced by the amount of the
quota purchased.
Buyout payments would be spread equally over a 5-year period. For example, payments
for buyout at the end of year 5 would be made in years 5, 6, 7, 8, and 9. However, the
buyout payment in year 25 would occur at the end of year 25.
In exchange for a buy-out payment, the quota owner would be required to agree
permanently to relinquish that portion of his or her quota.
D)
Payments contemplated by this proposal would be treated as all other payments
contemplated by the Proposed Resolution (pp. 34-35) (e.g., subject to 12/31 payment
commencement date, inflation protection for annual payments, adjustment for
volume decrease (adult volume only) or total volume increase, payment protection,
pass-through, and tax treatment). However, the duration of these payments would
continue for a period of 25 years (not in perpetuity), except with respect to
community development payments, which would continue for a period of 10 years.
E)
Implementation of this proposal is contingent upon the enactment of national
legislation incorporating the terms of the Proposed Resolution, including the civil
liability protections.
2
Tobacco Farners
DISCUSSION DRAFT
DATE: 2/5/98
Principles:
A)
Economic Development Payments: Provide resources to tobacco-growing
communities to help them adjust to the economic impact any legislation
incorporating the terms of the June 20 Proposed Resolution may cause.
For the first 10 years after the Proposed Resolution is enacted into national legislation,
economic assistance would be provided to tobacco-dependent communities in an amount
equal to 2% of the industry's total annual payments contemplated by the Proposed
Resolution.
Eligible states would receive block grants to (1) establish a tobacco worker transition
program to assist workers displaced from tobacco warehousing, processing, and
manufacturing operations; and (2) carry out non-tobacco economic development
initiatives in tobacco-dependent communities.
Recipient states would determine the areas within their borders most in need of economic
assistance and the form of assistance that will be provided.
B)
Tobacco Program Operating Costs: Operate the program at no net cost to the
taxpayers.
The tobacco companies would assume all administrative costs of the program, crop
insurance, and extension service fees relating to tobacco. The companies would continue
to pay their share of the assessment for the no-net-cost fund and the tobacco marketing
assessment, as required under existing law.
Tobacco farmers would continue to pay their share of the assessment for the no-net-cost
fund and their share of the tobacco marketing assessment, as required under existing law.
C)
Deficiency Payments: Protect tobacco quota owners and tobacco growers from
economic loss resulting from reduced demand and consumption of tobacco
products.
For a period of 25 years after the Proposed Resolution is enacted into national legislation,
payments would be made to tobacco growers to compensate for lost income resulting
from a decline in the "base quota."
1
DISCUSSION DRAFT
DATE: 2/5/98
For each year in which the quota declines from the "base quota," payments would equal:
[(base quota) - (current year quota)] X (average net profit/lb.)
During the first 5 years after enactment of the Proposed Resolution, "base quota" would
be calculated by averaging the quotas for the 1996 through 1998 marketing years.
Every five years after enactment of the Proposed Resolution, excess quota would be
bought out from quota owners at $8/lb. and the "base quota" from which income
deficiency payments are calculated would be readjusted and reduced by the amount of the
quota purchased.
Buyout payments would be spread equally over a 5-year period. For example, payments
for buyout at the end of year 5 would be made in years 5, 6, 7, 8, and 9. However, the
buyout payment in year 25 would occur at the end of year 25.
In exchange for a buy-out payment, the quota owner would be required to agree
permanently to relinquish that portion of his or her quota.
D)
Payments contemplated by this proposal would be treated as all other payments
contemplated by the Proposed Resolution (pp. 34-35) (e.g., subject to 12/31 payment
commencement date, inflation protection for annual payments, adjustment for
volume decrease (adult volume only) or total volume increase, payment protection,
pass-through, and tax treatment). However, the duration of these payments would
continue for a period of 25 years (not in perpetuity), except with respect to
community development payments, which would continue for a period of 10 years.
E)
Implementation of this proposal is contingent upon the enactment of national
legislation incorporating the terms of the Proposed Resolution, including the civil
liability protections.
2
tobacco
famers
EW
DISCUSSION DRAFT
DATE: 2/5/98
Principles:
A)
Economic Development Payments: Provide resources to tobacco-growing
communities to help them adjust to the economic impact any legislation
incorporating the terms of the June 20 Proposed Resolution may cause.
For the first 10 years after the Proposed Resolution is enacted into national legislation,
economic assistance would be provided to tobacco-dependent communities in an amount
equal to 2% of the industry's total annual payments contemplated by the Proposed
Resolution.
Eligible states would receive block grants to (1) establish a tobacco worker transition
program to assist workers displaced from tobacco warehousing, processing, and
manufacturing operations; and (2) carry out non-tobacco economic development
initiatives in tobacco-dependent communities.
Recipient states would determine the areas within their borders most in need of economic
assistance and the form of assistance that will be provided.
B)
Tobacco Program Operating Costs: Operate the program at no net cost to the
taxpayers.
The tobacco companies would assume all administrative costs of the program, crop
insurance, and extension service fees relating to tobacco. The companies would continue
to pay their share of the assessment for the no-net-cost fund and the tobacco marketing
assessment, as required under existing law.
Tobacco farmers would continue to pay their share of the assessment for the no-net-cost
fund and their share of the tobacco marketing assessment, as required under existing law.
C)
Deficiency Payments: Protect tobacco quota owners and tobacco growers from
economic loss resulting from reduced demand and consumption of tobacco
products.
For a period of 25 years after the Proposed Resolution is enacted into national legislation,
payments would be made to tobacco growers to compensate for lost income resulting
from a decline in the "base quota."
1
DISCUSSION DRAFT
DATE: 2/5/98
For each year in which the quota declines from the "base quota," payments would equal:
[(base quota) - (current year quota)] X (average net profit/lb.)
During the first 5 years after enactment of the Proposed Resolution, "base quota" would
be calculated by averaging the quotas for the 1996 through 1998 marketing years.
Every five years after enactment of the Proposed Resolution, excess quota would be
bought out from quota owners at $8/lb. and the "base quota" from which income
deficiency payments are calculated would be readjusted and reduced by the amount of the
quota purchased.
Buyout payments would be spread equally over a 5-year period. For example, payments
for buyout at the end of year 5 would be made in years 5, 6, 7, 8, and 9. However, the
buyout payment in year 25 would occur at the end of year 25.
In exchange for a buy-out payment, the quota owner would be required to agree
permanently to relinquish that portion of his or her quota.
D)
Payments contemplated by this proposal would be treated as all other payments
contemplated by the Proposed Resolution (pp. 34-35) (e.g., subject to 12/31 payment
commencement date, inflation protection for annual payments, adjustment for
volume decrease (adult volume only) or total volume increase, payment protection,
pass-through, and tax treatment). However, the duration of these payments would
continue for a period of 25 years (not in perpetuity), except with respect to
community development payments, which would continue for a period of 10 years.
E)
Implementation of this proposal is contingent upon the enactment of national
legislation incorporating the terms of the Proposed Resolution, including the civil
liability protections.
2
DISCUSSION DRAFT
DATE: 2/5/98
Principles:
A)
Economic Development Payments: Provide resources to tobacco-growing
communities to help them adjust to the economic impact any legislation
incorporating the terms of the June 20 Proposed Resolution may cause.
For the first 10 years after the Proposed Resolution is enacted into national legislation,
economic assistance would be provided to tobacco-dependent communities in an amount
equal to 2% of the industry's total annual payments contemplated by the Proposed
Resolution.
Eligible states would receive block grants to (1) establish a tobacco worker transition
program to assist workers displaced from tobacco warehousing, processing, and
manufacturing operations; and (2) carry out non-tobacco economic development
initiatives in tobacco-dependent communities.
Recipient states would determine the areas within their borders most in need of economic
assistance and the form of assistance that will be provided.
B)
Tobacco Program Operating Costs: Operate the program at no net cost to the
taxpayers.
The tobacco companies would assume all administrative costs of the program, crop
insurance, and extension service fees relating to tobacco. The companies would continue
to pay their share of the assessment for the no-net-cost fund and the tobacco marketing
assessment, as required under existing law.
Tobacco farmers would continue to pay their share of the assessment for the no-net-cost
fund and their share of the tobacco marketing assessment, as required under existing law.
C)
Deficiency Payments: Protect tobacco quota owners and tobacco growers from
economic loss resulting from reduced demand and consumption of tobacco
products.
For a period of 25 years after the Proposed Resolution is enacted into national legislation,
payments would be made to tobacco growers to compensate for lost income resulting
from a decline in the "base quota."
1
DISCUSSION DRAFT
DATE: 2/5/98
For each year in which the quota declines from the "base quota," payments would equal:
[(base quota) - (current year quota)] X (average net profit/lb.)
During the first 5 years after enactment of the Proposed Resolution, "base quota" would
be calculated by averaging the quotas for the 1996 through 1998 marketing years.
Every five years after enactment of the Proposed Resolution, excess quota would be
bought out from quota owners at $8/lb. and the "base quota" from which income
deficiency payments are calculated would be readjusted and reduced by the amount of the
quota purchased.
Buyout payments would be spread equally over a 5-year period. For example, payments
for buyout at the end of year 5 would be made in years 5, 6, 7, 8, and 9. However, the
buyout payment in year 25 would occur at the end of year 25.
In exchange for a buy-out payment, the quota owner would be required to agree
permanently to relinquish that portion of his or her quota.
D)
Payments contemplated by this proposal would be treated as all other payments
contemplated by the Proposed Resolution (pp. 34-35) (e.g., subject to 12/31 payment
commencement date, inflation protection for annual payments, adjustment for
volume decrease (adult volume only) or total volume increase, payment protection,
pass-through, and tax treatment). However, the duration of these payments would
continue for a period of 25 years (not in perpetuity), except with respect to
community development payments, which would continue for a period of 10 years.
E)
Implementation of this proposal is contingent upon the enactment of national
legislation incorporating the terms of the Proposed Resolution, including the civil
liability protections.
2