Friends of Tobacco

403 B East New Bern Road, Kinston, North Carolina 28501
Phone & Fax (919) 522-4769 *

Friends of Tobacco is a grass-roots organization dedicated to preserving an essential part of America's history and future. We believe that when any of our freedoms are taken away, all of our freedoms are at risk. Some people want that. Some people want to tell us that we can not enjoy ourselves after dinner, at work, in our cars, or in the privacy of our own home. If these people did not exist, we would not need to.
Friends of Tobacco has long promoted the economic impact of tobacco. One of our duties was to inform the industry and other interested parties on what is happening in the industry. Here is an update on what is going on in the industry.

The economic impact has certainly changed in many different directions since the passage of the Master Settlement Agreement (MSA) in 1998. Many government entities have since jumped on the bandwagon to get a piece of the action. As a result a lot of states are now dependant on tobacco money to balance their budgets. Here's a closer look.

Master Settlement Agreement (MSA) in 1998 - agreement between the States Attorney General's and the major tobacco companies to make payments to the States based on cigarettes sold into that state. Also, in this agreement was a start for reclassifying products to meet the definition of a "cigarette" in order to receive additional funds via taxation. For example; Roll Your Own Tobacco , "loose tobacco" was reclassified and in 2009 Little Cigars was reclassified by several States.

USDA - Placed a subsidy on tobacco manufacturers to fund the tobacco transition program to the tobacco farmers.

State's Children's Health Insurance Program (SCHIP Bill) - H.R. 2 - In order to establish funding for this new program - 2009 - Congress decided that tobacco could fund this program. A subsidy is placed on the tobacco manufacturers similar to the USDA subsidy to fund this program. Also slipped into this bill was the increase in Federal Tax on Tobacco Products. The highest tax increase in history was to roll your own tobacco that went from $1.0969 per pound to $24.79 per pound a whopping increase of 2,159%. This essentially wiped out this classification and category of tobacco.

FDA - Food and Drug Administration gain control over tobacco products. This is currently "Under Construction" as they are eliminating flavors, trying to change packaging and advertising, looking at ingredients, and how manufacturers perform day to day activities. This will come at no small price. Tobacco will have to pay for this also.

Friends of Tobacco recommends for specific details on any of the above programs or Bills to search the website of entity. These are too detail and broad to discuss in this narrative.

While the governments are increasing taxes, adding subsidies, escrows, penalties, fines on tobacco products; we also have local & state governments banning tobacco product use.

One would think that you cannot have it both ways. Give us the tax, but do not use the product. The sincerity of banning tobacco because of health issues is certainly erased by the governments anxious hands to grab as much tobacco money as possible. State's budgets are balanced with tobacco funds that were intended for health programs, not to mention many other diversions of the intended funds.

Smoker's are left out in the cold, small tobacco manufacturers have lost what little market share they had, tobacco farmers are losing contracts and looking for diversity, the auxiliary companies that provide products and services have suffered.

It seems that the economic importance of tobacco today is the Federal , States and local Government coffers.

Bill introduced to Raise Federal Pipe Tobacco Tax to $24.78 Per Pound
At the end of January, 2010 a bill was introduced in Congress that would increase the federal pipe tobacco tax from $2.8311 per pound to $24.78 per pound. Last year, when Congress expanded the State Children's Health Insurance Program (known as SCHIP), the federal excise tax on pipe tobacco was increased from $1.0969 per pound to the current $2.8311 per pound. At the same time, the federal tax on roll-your-own tobacco was raised from $1.0969 per pound to the current $24.78 per pound. A 2,159 % increase.

The new bill pending in Congress, H.R. 4439 would amend federal law to make the tax rate on pipe tobacco equal to the tax rate on roll-your-own tobacco.

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