A tobacco quota buyout worth nearly $10 billion to tobacco farmers and quota holders has passed the U.S. House of Representatives as part of a larger tax overhaul bill.
The legislation will still have to be passed in the Senate and then be signed by the president to become law, but the fact it has cleared this first significant hurdle has encouraged tobacco farmers across the South.
The proposal does not include Food and Drug Administration (FDA) regulation of tobacco and some analysts predict that could spell trouble for the buyout in the Senate, particularly from Democrat Sen. Ted Kennedy of Massachusetts. Still, North Carolina Commissioner of Agriculture Britt Cobb calls the House passage a 'milestone.'
"It gives us reason to be cautiously optimistic that North Carolinaâ€™s tobacco growers will soon be able to regain competitive footing with overseas producers," Cobb says. "We know obstacles remain, but we will continue to work with our senators and representatives to carry this momentum forward in seeking full congressional approval for this critical measure. With predictions of a 30% reduction in the tobacco quota for next year, it is imperative that Congress act now and pass this much-needed plan."
The quota buyout was added to HR 4520 by Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee. The bill passed the House in a 251-178 vote.
If signed into law, the buyout will pay quota holders $7 per pound for their tobacco and quota-renting farmers will be paid $3 per pound. Growers who both own and grow their quota will receive a combined $10 for their interest in the federal program.
There are an estimated 400,000 tobacco quota holders.
The buyout seems to meet two conditions imposed by President Bush on any buyout that requires his signature. First, the President says a quota buyout should not add to the federal deficit. Since the tobacco buyout would be paid for by extending a customs fee, now scheduled to expire, it seems to meet his condition on that score.
Secondly, the president has said he will not sign a buyout that included FDA regulation of tobacco. Again, the buyout meets the condition.
Environmental group says few will benefit
Taxpayers will give at least $1 million to 462 individuals, companies or estates under the $9.6 billion buyout plan.
A new Environmental Working Group (EWG) Analysis shows that tobacco buyout millionaires are at the very top of the House plan, under which 10% of the largest recipients-some 44,000 tobacco quota holders and growers--will collect 67% of the buyout funds, sharing more than $6.4 billion, for an average of $144,414 apiece over five years. The vast majority of tobacco farmers and quota holders--the 354,000 recipients in the bottom 80% of the buyout plan --will receive just over $1,000 per year over 5 years.
EWG analysis showed that the top recipient is the Barnes Farming Corporation of Spring Hope, North Carolina, which is eligible to receive an estimated $8,096,566 in the buyout. Some families and estates will receive payments through multiple recipients. For example, the Graham L. Cole Estate of Moultrie, Georgia will receive an estimated $6.7 million and the Graham L. Cole Sr. Estates, also of Moultrie and listed separately in USDA tobacco quota records, will collect an estimated $3.4 million.
The top 1% of recipients--4,435 individuals, corporations, estates and other entities--will collect 27% of the $9.6 billion, a total of more than $2.6 billion, averaging $591,212 apiece over five years ($118,242 per year), EWG found.
For more information and opinion articles on the buyout proposal, visit the North Carolina Farm Bureau Federation Web site.