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Kentucky Tobacco Farmers Win Unexpected Battle in Washington, Chewing Tobacco Tax Lowered in State

The tax on chewing tobacco in Kentucky will drop from roughly 41 cents to 19 cents per pouch courtesy of legislation passed in the General Assembly. WYMT reports:

Representative Rick Rand says a legislative analysis shows the cut will cost the state more the $425,000 in revenue, but will fix the way Kentucky collects taxes on tobacco.

“The ability to collect the tax on not only chewing tobacco, but other tobacco products, premium cigars and those types of things that we aren’t collecting, it will actually be a new gain revenue,” Rand said.

The Courier-Journal in Louisville calls the new law "a very bad tax cut":

Because only in Kentucky could a bill purported to clean up and standardize the way the state collects taxes on tobacco offer a special break to the chewing tobacco industry with virtually no notice by anyone who follows this stuff, including some lawmakers who voted for it.

But incredibly, House Bill 361 does just that, according to The Courier-Journal’s Tom Loftus, who reported in a news story Sundaythe real impact of the bill lawmakers passed this year.

Meanwhile, in Washington, DC, Kentucky tobacco farmers won a battle as reported in full by Tim Thornberry of KY Forward. This article is reprinted in its entirety with permission:  

Learning to deal with adversity is something tobacco producers have faced over the past decade. But as a new Farm Bill is debated, many were blindsided by an amendment to that bill proposed by Sen. John McCain (R-Ariz.) and Sen. Dianne Feinstein (D-Calif.) that would have ended federal subsidies for tobacco crop insurance.

The amendment was short-lived and voted down almost as quickly as it arose but it indeed raised questions as to whether tobacco growers had a new fight on their hands.

Brian Furnish, a tobacco farmer and president of the International Tobacco Trading Group (ITTG) said the amendment came as a surprise but tobacco should not be treated any differently than grapes for wine or grains for liquor. “Tobacco is a legal crop and we should be treated the same,” he said.

As luck would have it, Furnish was in Washington at the time the amendment was announced working on another tobacco crop insurance issue. He along with Rod Kuegel, president of the Council for Burley Tobacco, were there representing the organization to address the three-year rule facing tobacco producers this growing season. The rule states that farmers can not insure a tobacco crop grown on the same acreage where it has been grown in the previous two years.

Upon hearing about the proposed amendment, Furnish said he and Kuegel immediately hit office after office speaking to officials about misinformation concerning subsidies for tobacco. The biggest misconception being that the federal tobacco quota buyout was funded by the government.

The USDA’s Farm Service Agency specifically notes in its program fact sheet that, “The funds required to pay for TTPP (Tobacco Transition Payment Program) and other related costs are obtained through assessments on manufacturers and importers of all tobacco products totaling no more than $10.14 billion over a 10-year period.” Tobacco buyout payments will come to an end after 2014.

Furnish said both of Kentucky’s senators voted against the amendment. He especially noted the “no” vote from Sen. Rand Paul who has spoken out against crop insurance subsidies in the past.

McConnell, who led the opposition in the Senate, said in a statement after the vote, “This is a big victory for Kentucky’s tobacco growers and their families. I was happy to lead the fight to protect our farmers from another assault by Washington to go after our home state jobs.”

Furnish said he felt like many lawmakers had second thoughts about supporting the amendment because of what might happen if other crops came under attack. The amendment failed with a 52-44 vote. “It was a good day for tobacco farmers but I’m sure someone will try again,” he said.

Furnish added that lawmakers should be focused on stopping illegal black market cigarette sales as opposed to fighting a legal crop where tobacco companies pay their fair share of taxes.

Kuegel, who is also a tobacco farmer, said he and Furnish first went to McConnell’s and Paul’s offices but also spent a lot of time in McCain’s office which proved to be very productive.

“We got a very favorable response out of Sen. McCain’s office. They quickly told us this wasn’t their bill but were returning a favor for what Sen. Feinstein had done for them on an immigration bill,” he said. “I don’t know whether we diffused the bill but we diffused some of the opposition that tobacco farmers face from time to time. We are just farmers doing what we know how to do and doing what has been done here for a couple of centuries.”

Kuegel said it was gratifying to see support for the industry knowing that it would be a matter of time before other sectors would be targeted.

“If they were able to carve out tobacco, who would be next, the butter fat industry in dairy or the hops industry in beer?” he asked. “It would be a matter of time before they came after other farmers and hopefully by curtailing this effort, maybe we won’t hear about that anymore.”

Kuegel added that with all the changes that have faced tobacco growers since the quota buyout, a need arose for an organization to represent nothing but growers and issues they face, “And that’s what the Council is going to be about from this time forward,” he said.

The organization is focused on a couple of key issues right now one being that of crop insurance and the other is grower contracts.

“We’d like to start looking at the contracts and having them reviewed by a lawyer, not to take any actions against the tobacco companies but to make growers aware of which contracts require more and which contracts are outside the box on what they ask of the farmer,” Kuegel said. “We’re farmers, we’re not lawyers.”

In looking at the contract issue, Kuegel said he hopes to also get input from the tobacco companies.

“I’ll be quite honest; probably 95 percent of farmers never read the contract. We’re not going to challenge the companies upfront, we just want to make farmers aware of what is in the contracts, let them compare and be comfortable,” he said. “One may be a nickel higher but there may be some restrictions and potential problems in a contract that would cause you to go with another company.”

He also said the crop insurance issue that brought him to Washington in the first place has some rules that are not advantageous to farmers.

“There are areas in Bath County and Owen County where they have been growing tobacco for 20 years and they don’t have any problems.”

Those counties are located in areas of the state where producers have smaller farms and moving a tobacco crop to other acreage may not be possible.

Kuegel said the regulation should state that if a farmer has had a claim in the last five years, you can’t grow tobacco on that same land and not penalize those that have not had claims.

Tim Thornberry is a freelance writer and photographer who has covered Kentucky agricultural and rural issues for various publications since 1995.

Photo: This barn once used for tobacco production sits nearly in ruins in the middle of a cornfield. Much of the land and infrastructure once used for tobacco production has given way to grain producers who don’t have the labor issues tobacco farmers do. (Photo by Tim Thornberry)