Windfall for Big Tobacco Will Cost American Taxpayers $500 Million

Washington, DC -—The cigarette companies and Senator Mitch McConnell (KY) are at it again. At a time when serious and thoughtful proposals are needed to address the real problems facing tobacco farmers, Senator McConnell recently inserted a provision into the Agriculture Appropriations bill that will use $500 million of U.S. taxpayer dollars to buy up hundreds of tons of surplus burley tobacco leaf. According to industry sources, the big cigarette companies are planning to buy this tobacco from the Government at a steep discount that will give them hundreds of millions of dollars in windfall savings.

While Senator McConnell says this government purchase of surplus burley leaf is designed to help U.S. tobacco farmers, it actually does more to bail out the big cigarette companies who caused this crisis by turning their backs on American farmers and using increasingly large amounts of foreign instead of American-grown tobacco in the cigarettes they sell. The cigarette companies should be held directly responsible for creating the large surplus inventories of American-grown tobacco and for causing the enormous problems that many small U.S. tobacco farmers currently face. Instead, the McConnell provision rewards the companies by selling them taxpayer-subsidized tobacco at fire-sale prices.

The surplus burley tobacco at issue is the same tobacco that the cigarette companies have repeatedly refused to buy from the Burley Tobacco Growers Cooperative unless the Co-op would sell it at a 50% discount. Because the Co-op refused to go along, the companies have had to find a different way to get this tobacco at well below U.S. market prices. With Senator McConnell's help, they have found one.

There is another problem with the McConnell proposal. U.S. tobacco farmers and their communities are facing problems that demand long-term solutions. But this burley buy-out is just another temporary, poorly applied band-aid that does nothing to address the fundamental problems facing the small family-run tobacco farm in the United States. This $500 million taxpayer buy out might help some burley tobacco farmers get through to next year, but it will do little or nothing to improve their longer-term prospects. It also does nothing at all to help those flue-cured tobacco farmers who need assistance, as well. If the McConnell provision is signed into law, it could also remove the pressure for the kind of real action that is needed to address this crisis properly.

If U.S. taxpayer dollars are going to be used to help U.S. tobacco farmers, that funding should address the root causes of the tobacco farmers' problems -- not just buy some time and give a major windfall to the cigarette companies. It should also specifically target assistance at those small farmers who actually need it, and help them develop alternative sources of income.

It is also troubling that the McConnell provision would, for all practical purposes, turn the U.S. tobacco support program back into a taxpayer-financed program. Without more substantial efforts to address the fundamental problems facing small U.S. tobacco farms, Senator McConnell and others will almost inevitably call for similar, repeated taxpayer buy-outs of surplus burley and flue-cured tobacco in future years. Since 1982, American tobacco farmers have been rightfully proud of the fact that the U.S. tobacco support program has been entirely financed by the tobacco companies and by the farmers, themselves. Handing the bill back over to the American taxpayer should not be done without careful deliberation and only after all the other alternatives have been considered.

The big cigarette companies have created the U.S. tobacco farmers' problems by shifting to foreign tobacco leaf and to overseas production of their products, while providing enormous amounts of financial and technical assistance to foreign tobacco growers. It would be adding insult to injury if the cigarette companies were now allowed to buy taxpayer-subsidized American-grown tobacco at heavily discounted prices. It might even be better just to destroy it.