Tobacco Documents Online

ADMIN. JaU 2 71983 LAW OFFICES DEEHE$, WILSON, ADAMS, cTENSEN, SAYRE & GBIBBLE ROBERT E. DRENE.R GEORGE' A. WILSON DICK L.JENSEN. ~ JAMES L. SAYRE CHARLES E. GRIBBLEGEORGE A..WILSON, la MARK. R. ADAMS MICMAEL.J..MILLER ROBERT A_MANNNEIMERGERALD L. HAMMOND BECKY SUE KNUTSON 200 STEPHENS BUILOING AREA CODE 51S TELEPHONE 288-0247 DBS MoII'PES, IOWA 50008 January 24, 1983 Mr. Samuel D. Chilcote, Jr. President The Tobacco Institute 1875 I Street, No rthwest Washington, D. C. 20006 Dear Sam: Thank you for your letter of January 17. A long time prior to The Tobacco Institute's and Tobacco Tax Council's policy of having legal representatives in each state, the -Iowa Association of Tobacco Distributors handled all tobacco problems in our state, whether it was distributor, manufacturer, or retail problems. Whatever our success or failures were, the distributor organization not only paid fo r the service but took whatever criticism that came from the position we took for the industry as a whole. As we see what you are doing today, the re will be a manufacturers' position presented to the Iowa Legislature determined by your board of manufacturers which may or may not be a popular issue or position in Iowa. Some of these positions will have very little effect on the distributors in this state. Certainly others will. Let me give you an example of what I mean. During the last sessicn whemthe distributors attempted to correct our unfair cigarette sales act, the question of sampling was considered by an amendment from the floor when the bill was being discussed in the Senate. Our Association took an active part in attemptina to defeat that issue. We lost in the :Senate. The bill still had to pass the House of Representatives before it could become law. Bob Hanrahan set up a conference call between -all of the manufacturers, The Tobacco Institute representatives and me. I was told that if I couldn't guarantee that the sampling issue would be deleted, the bill had to be "killed". In our business as legislative counsel, as you well know, no such guarantee could be given legitimately; and if it were, it would not have been worth the paper it was written on. After the bill passed on a vote of 26 - 24, a motion to reconsider was filed and adopted. The second time the bill was discussed not once was the question of sampling raised. On the final vote, the bill received 25 votes for it and 24

Mr. Samuel D. Chilcote, Jr. January 24, 1983 Page 2 against: Having failed to receive a constitutional majority, the bi1l was "dead" for the session. - The question of the "sunset" on the tax from a legislative stand- point point didn't have to be answered at that time because the "sunset" provision didn't take effect until July 1, 1983. Now the legislature must decide during this session, "Are we going to continue the tax on a package of cigarettes at 18 cents or have it revert to the 13 cent tax?" If the tax were to "sunset", the question of our unfair cigarette sales act would be resolved favorably from our standpoint, as the so-called Comito amendment would also "sunset". If the tax is to continue at 18 cents, which our new Governor recommended in his budget message on Friday, then the issue of the unfair cigarette sales act, sampling, tax on other tobacco products, and even an increase of the cigarette tax above the 18 cents could be considered. The tax on other tobacco products in Iowa is figured on percent of the wholesale price. An enonomist from one of the national legislative advisory groups, a Professor Gold, appeared in Iowa at an interim committee hearing,of the Ways and Means Committee and made a recommendation that Iowa tax cigarettes as a percent of the wholesale price. As the industry figures have generally show, on an average, states tax cigarettes at about 40 percent of the wholesale price. Following this line of logic, every time the manufacturer raises his price, the tax will correspondingly ' rise. The legislature would not have to face the issue of a tax increase again; and conversely, the distributors would remove' at least one opportunity for the legislature to repeal our unfair cigarette sales " act. If this approach were to be enacted, our tax would go to about 20 to 21 cents per package. The burden of increased tax on cigarettes in Iowa would certainly fall from then on to the manufacturer. If the manufacturers were concerned about Iowa adopting a pro- hibition on sampling because of the likelihood of it spreading to other states, what would their reaction be to the idea of cigarette tax based on a percent of the wholesale price? Tobacco representation for anyone is not am easy burden to carry. This product does not enjoy a`favorable attitude with the majority of our population; and even the people who use it, generally say they would be better off if they didn't. It is hard to find legislators, possibly outside of the tobacco South, who really want to lead a-fight to defend tobacco against taxation, smoking restrictions, and so forth. Cigarettes =are not manufactured in this state; tobacco is not grown in this state; tobacco distributors have businesses in this state. Not because of the popularity of tobacco products, but because distributo rs provide jobs, pay taxes and have votes, are they able to provide some impact on the legislative p rocess in Iowa. The Tobacco Institute determined~what our services were worthh to your organization last year; and in light of what we see happening

.Mr. Samuel D. ChilUe, Jr. January 24, 1983 Page 3 during this session, we are not prepared to accept anything less. We welcome Charlie Wasker as a co-worker on these problems, and we have worked together over the years on many legislative problems. Charl'ie and I are personal friends and intend that to continue, so please don't think that our reluctance to agree to your offer has anything at all to do with your retaining Charlie as your legislati.ve counsel:. This letter is probably too long, but I am attempting to explain to you "our position", which apparently was unclear in our first letter. I am already being contacted by legislators in reference to some of the problems which we have outlined above, partly in.the area of sampling, the "sunset" provision, And an increase of tax on other tobacco products. I would appreciate an early decision on the part of The Tobacco Institute as to whether or not our relationship will continue so that I am able to give the legislators an appropriate response. Very truly yours, .~ George ~'~ ~Wi 1 son GAW:bi