Opinion: Tax Cuts Poor Trade-off for Tobacco Regulation [07/21-1]

Excerpts from: Poor trade-off for tobacco regulation

Newsday [07/21/04]


Tobacco should be regulated by the Food and Drug Administration, but the price that Congress would exact in granting that authority has become too high. A payoff for tobacco farmers is one thing. But Congress has added another bloated tax cut to the mix, and that's too much to swallow.

Nicotine is an addictive drug. Tight regulation could limit the number of young people who get hooked and maybe even help wean the country off the unhealthy habit. So it was good that the Senate voted to allow the FDA to regulate nicotine.

It was even OK that the Senate linked regulatory authority to a $12-billion buyout of tobacco quotas put in place during the Depression to support prices by limiting the amount of tobacco farmers could grow. The usefulness of the quotas has dwindled over the years as the domestic share of the tobacco market shrank. But the quotas still have value: Farmers who don't grow crops sell their quotas to those who do. So farmers want to be paid if the quotas are ended. That's not a very compelling case for compensation, but it's an acceptable trade-off as long as tobacco interests pay the freight, as they would under the Senate bill.

Unfortunately, the House passed a quota buyout without authorizing FDA regulation of tobacco. And the House would saddle taxpayers with its $9.6 billion buyout tab.

Then there's the tax cut. Congress has to end an export tax subsidy that the World Trade Organization ruled illegal. But instead of just eliminating the subsidy, Congress voted also to provide $150 billion over 10 years in new tax breaks for an array of businesses. The Senate would offset all of the cost by, for instance, ending some tax shelters, but the House wouldn't.

When House and Senate bills are reconciled, there is a danger that the result could be a tobacco quota buyout, another deficit-swelling tax cut and no FDA regulation. That would be an abomination.

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