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Tobacco Companies Can Afford Cost of Grower Buyout Proposals

Statement of Matthew L. Myers President, Campaign for Tobacco-Free Kids
August 06, 2003

Washington, D.C. — R.J. Reynolds and other tobacco companies are crying wolf when they claim that they cannot afford to help pay for a proposed federal buyout of tobacco growers and quota holders. There should be no confusion: The tobacco companies will fund this proposal, just as they do everything else, with a small increase in the price of a pack of cigarettes. By raising cigarette prices by just a few cents a pack, each of the tobacco companies could easily raise the money needed to pay their share of the cost of a tobacco buyout. The unwillingness of R.J. Reynolds and other tobacco companies to help tobacco farmers by helping to fund a buyout shows their true colors. The tobacco companies have profited handsomely from the hard work of tobacco farmers and like to hide behind the farmers when fighting public health legislation, but they are quick to abandon the farmers to maximize their own profits. It is critical that tobacco-state lawmakers stand up to the tobacco manufacturers and protect farmers' interests instead.

Estimates of the per-pack cost of buyout proposals range from six cents a pack for legislation introduced last week by tobacco-state Senators to 17 cents a pack for a more generous proposal made in 2001 by a Presidential Commission, which is similar to legislation (H.R. 245) introduced by U.S. Rep. Ernie Fletcher (R-KY). The arguments the tobacco companies are making against such price increases are not new and are similar to those they have made in trying to defeat state cigarette tax increases. The tobacco companies always plead poverty when faced with cigarette price increases if they are not the recipients of the revenue, but they are more than willing to increase prices to fatten their own profits. For example, in their hunger for ever greater profits, the companies increased prices after the 1998 state tobacco settlement far in excess of what they needed to make the settlement payments.

As R.J. Reynolds has done, tobacco companies that oppose the buyout will be tossing out misleading numbers purporting to show that they cannot afford to help pay for a buyout. But history shows that the tobacco companies are quite capable of raising the amount of revenue in question, at least when it comes to their own self-interest.